FAQ; How many times can I use a VA loan

How Many Times Can I Use a VA Loan to Purchase a Home?

How many VA Refinances

This is a great question, and one that we get very frequently. Often this question comes from borrowers who have purchased a home with their VA loan benefits and are looking to purchase another home, hopefully with a VA loan again. In cases like this, there are two factors to consider, and one factor that you may think be important, but actually is not, beyond its relation to one of the two factors that does matter. That probably sounded somewhat confusing, but we’ll go into it all in this post. The two factors that matter are the policy restraints that the VA has on multiple loan usage, and the practical restraints that can prevent a borrower from using their VA loan multiple times. The factor that surprisingly does not matter is whether you currently have a home financed with a VA loan (save that this scenario does introduce a significant practical restraint).

 

The first thing to consider is the restraints that the VA has on multiple VA loans. The VA does not have any policies in place that prohibit eligible borrowers from using the VA loan program multiple times for different properties. The biggest thing you’ll notice is that the VA charges a larger percentage of the loan amount for the Funding Fee on subsequent uses than on first-time uses. While it’s not significantly larger, it can come as an unpleasant surprise if you’re not aware of it beforehand. For a VA borrower using their VA loan benefits for the first-time, the funding fee is 2.15% unless the borrower makes at least a 5% down payment. On a subsequent use, the funding fee is 3.3% unless the borrower makes at least a 5%. Insider tip – for borrowers making at least a 5% down payment, the funding fee is the same for the first-time use as it is for subsequent. For a down payment of 5% or more, the funding fee is always 1.5%. For a down payment of 10% or more, the funding fee is only 1.25%.

 

The second, and far more restrictive, things to consider are the practical restraints to using your VA loan benefits multiple times. For the borrower selling their existing home and moving into a new one, the most obvious practical restraint is going to be savings and money sufficient to purchase a new home. For this reason, most veterans are going to be limited to buying a new home with the VA loan benefits every 4-6 years. Additionally, there’s the obvious restraints of finding a suitable home close to work and school and the trouble and expense of moving. For the borrower who still owns a home already financed with a VA loan, they’re going to run into a very large restraint in the form of a limit on how much entitlement you have available from the VA. The entitlement amount refers to how much the VA is willing to guarantee to the lender on your behalf in the event of a default.

 

FAQ Refinance TimesFor the most part, you’ll need to have at least 25% of the loan amount covered by either the VA guarantee or a down payment in order for a lender to be willing to issue you a VA loan. Since you only have a finite amount of entitlement available, you’ll only be able to have more than one home financed by a VA loan if the homes you are purchasing are relatively low-priced. As we hinted above, already owning a home with a VA loan does not, in and of itself, present a problem to using your VA loan benefits on another home. There is a limitation to this however – for a home that is financed with a VA loan but is no longer the borrower’s primary residence, the VA will not permit the borrower to get a cash-out refinance on the property.  The only way to refinance a home you no longer live in is to use an IRRRL.

 

So, in summary, there’s no theoretical limit to how many times you can use your VA loan benefits – the VA, at least, does not place any restrictions on how many times you can use your VA benefits, only on the amount of entitlement a veteran is eligible for.

 

FAQ Refinancing Closing Costs

Are there Closing Costs on a VA Refinance?

Ease the burden of closing costs

Closing costs: every borrower’s favorite part about getting a loan. Because the six figures you have agreed to pay back at 5% annually-compounded interest over the next 30 years isn’t enough, right? It’s obviously more complicated than that, but that’s how it feels when you first find out that of the $20k you painstakingly saved up over the last 5 years for a down payment, only about half of it will actually go towards the down payment. In a conventional loan, there’s always the worry that the ability to charge closing costs is abused, and only diligent shopping around and lots of research of homework can help you be sure when someone is charging more closing costs than they should be. Like any loan program, VA loans have closing costs: refinances as well as new purchase loans. The VA, however, has policies in place to both protect the veteran borrower and ease the burden of closing costs.

 

Regardless of what type of refinance you get, there will be closing costs. However, costs on an Interest Rate Reduction Refinance Loan (IRRRL) are different from the closing costs on a cash-out refinance. Closing costs on a cash-out refinance are very similar to closing costs on a new purchase loan. Closing costs on a cash-out refinance can include prepaid interest, property taxes, and homeowners insurance, discount points on your interest rate, the VA Funding Fee, any homeowners association dues, as well as the cost of getting your credit report, a pest inspection fee, the VA appraisal, origination, underwriting, and processing fees, and the cost of the title exam and insurance. Sounds like a lot (and it is), but the VA makes sure that the borrower only pays for things that are both typical and acceptable for the borrower to be charged. Nothing prevents the borrowers’ closing costs being paid by the seller, but nothing requires the seller to pay for them either.

 

The VA has limits to the overall amount that the lender can charge the borrower, and on a cash-out refinance, the VA Funding Fee can be rolled into the loan amount and not be due upfront. Since the Funding Fee can be as much as 3.3% of the loan amount, this is no small boon to the veteran borrower. Other than the VA Funding Fee, no other closing costs can be rolled into the loan amount, at least on a cash-out refinance. While the actual amount of closing costs charged on your VA loan will vary widely depending on the loan amount, the region you live in, and the lender you choose, you should expect to be measuring it in thousands of dollars, not hundreds.

Preparing for closing costs

The IRRRL is a different story. Yes, there are still closing costs on an IRRRL, but the simple and quick nature of the IRRRL cuts out of the costs. You won’t have to worry about the fee for the VA appraisal, you can expect the underwriting and origination fees to be significantly lower, and the real kicker: every dime of closing costs on an IRRRL can be rolled into the loan amount. The purpose of the IRRRL is to provide a streamline refinance option to VA borrowers to enable them to take advantage of lower interest rates, and the VA wants as few obstacles as possible to borrower wanting to take advantage of this benefit. The IRRRL allows you to not only roll the Funding Fee into the loan amount, but all of the allowable fees and charges that the lender asks. But wait, there’s more.

 

On an IRRRL you can also purchase two discount points on your interest rate, and roll that cost into the loan. In other words, you can get a better interest rate without paying a dime right now. You can purchase more discount points if you want, but only two of them can be rolled into the loan amount. One of the biggest advantages of the IRRRL over cash-out refinance is the way closing costs are handled on an IRRRL. You should remember though, that if you decide to roll closing costs into the loan amount, you’ll end up paying more than you would if you had paid them upfront, due to the interest being charged on them.

 

FAQ Refinance Appraisal

Do I Have to Get an Appraisal for a VA Refinance?

 

You might; it depends on what type of refinance you’re getting. This can be a major factor in which type of refinance you choose to use. Even on a conventional loan, the inspection that determines the fair market value of the home can sometimes throw a wrench in the works. If the value comes in too high, the seller may decide to raise the price of the home, and be unwilling to sell it for lower. If the price comes in too low, the seller may not be willing to lower the price of the home and if you still want to buy it, then some of your down payment will have to go towards getting the price down to what the lender is willing to make a loan for. If the seller is willing to lower the sale price, then the only major downside is that the home you’re buying isn’t worth as much as you thought it was.

 

With the VA loan program, a home must be appraised by an official VA appraiser. The appraisal is very similar to a normal home inspection, but with two specific focuses: determining the fair market value of the home, and making sure that the home is safely inhabitable and suitable for the veteran’s needs. Where a conventional inspection just determines the fair market value and leaves it up to the borrower, a VA appraiser has the power to put the kabosh on the whole thing. Because of this extra level of power that the VA appraiser has, the appraisal process is often a point of stress, frustration, and complication in getting a VA loan. Needless to say, borrowers looking to refinance want to know if this rather onerous step is one that can be skipped. The answer, as mentioned above, depends on what kind of refinance you are getting: an Interest Rate Reduction Refinance Loan (IRRRL), or a cash-out refinance.

 

The IRRRL is the VA’s streamline refinance option, and as such, it makes speed, ease, and affordability its highest priorities. If you use an IRRRL to refinance your home, then a new appraisal on the property is not necessary. There’s a catch to this, though, and that is that really the only thing an IRRRL can be used to do is get a better interest rate – anything else you want to use a refinance to do will have to be done with a normal refinance. What makes an IRRRL so much faster is that it reuses much of the underwriting information from the original loan, with the assumption that none of that information has changed much. Because it would require a determination of the current value of the property, as well as other underwriting information, an IRRRL cannot used to get cash-out on the equity in the home.

 

Do I need and appraisalOn the flip-side, any other type of VA refinance requires a new appraisal, and totally new underwriting, which is what enables them to offer such options as cash out. Generally speaking, if a VA refinance is not an IRRRL, it is referred to as a cash-out refinance. This is somewhat misleading, however, since the term refers to not only actual cash-out refinances, but cash-in refinances and debt consolidation loans. If you’re getting anything other than an IRRRL, you will be required to get your home appraised again by a VA appraiser. In many cases, this actually works to your advantage – if you’ve added $10k to the value of the home since you bought it, you want that reflected in the amount of equity you have in the home. Why? Because you can only get as much cash out as you have equity in the home. This is also why a new appraisal enables a borrower to get cash out on the refinance – because the current fair market value of the home must be established in order to calculate how much equity the borrower has in the home.

 

In summary, if you use an IRRRL to refinance your home you will not be required to get it re-appraised, but you also have significantly fewer options with your refinance. If you use a cash-out refinance, you will need to get a new appraisal, but you can do a lot more with your new loan.

 

FAQ Credit Score Refinance

What Does my Credit Score Have to be?

 

Congratulations, you’ve officially opened a can of worms. If you’ve asked this question before, you probably realize that you’re about to hear something different than you heard when you asked someone else. Every lender has different requirements, and even different ways of handling credit scores, each tailored to fit what that lender feels works best for their borrowers and their business model. The Department of Veteran’s Affairs sets no requirements on a VA-eligible borrower’s credit score. If the VA-approved lender is willing to finance the loan, then the VA is willing to guarantee it. The VA does its best to not interfere more than it thinks is necessary in the mortgage process, and not dictating a credit score is one way that they ease the regulatory burden on lenders and make it so they are never the “bad guy” if a veteran does not get approved for the loan. Brilliant, I’d say.

 

So, on to what really matters: credit score minimums set by lenders. This is where you’ll hear a different answer every time, because each lender has their own requirements. Most VA lenders have a set number that they will not approve anything below, and anything close to the minimum may be subject to extra scrutiny. In the case of many lenders, this minimum is 620. If that number makes no sense to you, here’s a basic scale:Minimum Credit Needed for VA Loan

  • 580 or lower (Poor Credit)
  • 580-620 (OK Credit)
  • 620-660 (Good Credit)
  • 680-720 (Great Credit)
  • 720 plus (Excellent Credit).

 

 

 

In other words, 620 is right on the line between poor credit and OK credit. The main problem with having a hard minimum set like 620, is that good, creditworthy individuals may have had something bad happen to them that has set their credit score back. A common example of this is when an injury or medical emergency happens and the medical bills are negatively affecting a credit score. Heck, just the expenses of having a baby can have a drastic effect. This is one way that LowVARates is different from many other lenders – we have no set minimum acceptable credit score. Obviously, a score in the low 600s will be under more scrutiny than a score approaching 800, but no applicant is ever denied based on nothing but his or her credit score. We have this approach because we know that bad things happen to good people, and we know that behind every number is a lifetime of history, and a single snapshot never tells the whole story. So even though a 620 minimum is still actually quite borrower-friendly compared to other loan programs, we do not use a set minimum or what is considered “industry standard”.

 

If your credit is poor, be prepared for a higher interest rate or closing costs, though. While this does not always happen (sometimes we are able to secure the same interest rate and fees as for someone with great credit), it can be a way to mitigate the risk of making the loan. Some potential borrowers are actually a bit turned off by the fact that we don’t necessarily adhere to the accepted industry standard. Like as not, this has to do with the many scams out there that say things like “we offer credit amnesty” and “get approved even with bad credit”, but the fact is that we at LowVARates believe we are working with people, not numbers, and if we can do more people more good by looking beyond a number to their actual behavior and commitment, then that is what we will do. No one’s asking you to believe us, but our customer satisfaction says it all.

 

We mentioned above that even the 620 minimum is quite borrower friendly compared to other loan programs. While FHA loans usually carry the same 620 minimum, USDA loans usually require at least a 660, while conventional loans usually look for something in the 740 range. Anything under 740 is usually subject to additional scrutiny and subsequent fees, if it is approved at all. So even if you choose a different VA-approved lender than LowVARates, a VA loan is far easier to qualify for than a conventional loan.

 

Loans Involving Temporary Interest Rate Buydowns

Deciphering the VA Lender’s Handbook Chapter 7 Part 18

 

While something you may have not heard about before, something you’ll likely want to know about and keep an eye out for, is the possibility that home builders, sellers, or lenders may sometimes establish and fund a special escrow account for the purpose of reducing a borrower’s loan payments during the initial years of the mortgage. This is often used as a marketing tool to attract more buyers. In some cases, a borrower may also fund an escrow on their own as a financial management tool. The VA has no problem with these types of situations, as long as the borrower is eligible for the VA loan being offered and the lender is VA-approved. Additionally, such an interest rate buydown can be used with any type of loan except for a GPM.

 

There are some special rules that govern the way the escrow account works in these cases. First, whichever party is establishing the escrow (builder, seller, lender, borrower), the escrow must be out of reach of their creditors. In other words, it must be something protected from seizure should a creditor have legal cause to seek payment of a debt. The only exception to this rule is if the holder of the loan is the Federal National Mortgage Association. If FNMA is the holder, they can take direct custody of the funds. The escrow agent (not the party that established and funded the escrow, but the party that has the ability to access the funds), is required to make payments out of the escrow directly to the lender or servicer of the loan. The funds from the escrow can only be used for payments currently due on the note, and cannot be used for past due amounts. If the loan is foreclosed, the funds are credited against the veteran’s indebtedness.

 

Temporary Interest Rates Obviously, such an arrangement affects the borrower’s first year or several years of making payments on the loan. This begs the question of which monthly payment amount should be used to underwrite the loan and determine sufficient income. To clarify, if the payments the first year are $900/month and $1,100/month after the buydown runs out, should the lender use the $900 figure or the $1,100 figure in determining eligibility? For the most part, the lender will use the $1,100 figure. However, the VA does have provisions that allow the lender to use the $900 figure in certain cases. The main factor is whether the borrower’s income is likely to increase enough over the next few years to keep pace with the increase in payments as the buydown runs out. Generally, the lender is expected to use information such as an increase in wage guaranteed by a labor contract (teachers, auto workers, etc.) and other factors that strongly indicate that the borrower’s income will increase.

 

The buydown must run for at least 1 year, and the increases in payments (or interest rates) must be accomplished in equal amounts each year as the buydown runs out. If the borrower’s income cannot reasonably be expected to increase to keep up with the payments, then the loan must be underwritten using the full monthly payment that will be required after the buydown runs out. This ensures that the borrower will be able to keep pace with the payments even if their employment and income do not improve over the next few years. However, even in this case, the buydown arrangement can be considered a compensating factor if the borrower’s income or credit is not quite sufficient for loan approval, and may make the difference between getting approved for the loan and not, though usually more than one compensating factor is required to make that happen.
As a borrower, you should receive a clear, written explanation of the buydown agreement from the lender which you will need to sign. If there is anything about the buydown agreement that you do not understand, make sure to check it with your lender before moving forward. Buydowns are not very common and usually go pretty quickly when they crop up, but if you find a builder, seller, or lender offering a buydown, you should at least check it out to see how much benefit you will get out of it.

FAQ How Long Should a VA Refinance Take?

How Long do VA Refinance Loans Take?

 

This is one of those frequently-asked questions the applicant has more control over the answer than anyone else. How, you may ask? Because the single biggest variable that determines how long a loan takes to process is how quickly the borrower supplies the documents and information that the loan officer and underwriter need to move the loan forward. That being said, the “base time” that it is going to take is still very important and helpful for planning. Just know that your own responsiveness and cooperation will have the greatest effect in determining how long your loan takes to process. You can make it go much faster, or you can make it take longer. Quick tip: if you want to annoy your loan officer, take a long time getting documents and information to them, then complain about how long the loan is taking. the “base time” is going to be different depending on the refinance you are doing and what you are trying to accomplish.

How long will it take?

An uncomplicated IRRRL can be completed extremely quickly – in as little as 10 days in some cases. IRRRLs are meant to be very fast, however – that’s why they are called a streamline refinance option. Even an IRRRL can take a long time if the borrower does not provide the necessary information in a timely manner, however. On the lender’s side, the process is very quick and easy. IRRRLs can commonly take around 20 days, and a more complicated IRRRL that waits on information from the borrower can take up to 30 days. It is extremely odd for an IRRRL to take longer than 30 days. You can check with your lender about whether the loan will need to be sent to the VA for prior approval. Most IRRRLs do not (even if the lender you’re working with doesn’t have automatic authority), but some will, and having to send the loan application to the VA for prior approval can add a week to the time it takes to close.

 

A cash-out refinance has a lot of variation as to how long it might take. The general rule of thumb for a new purchase loan is 45 days. Refinances generally go somewhat faster, and 30 days is usually a safe bet. However, while a cash-out refinance won’t often be much quicker than 30 days, it can be a good deal longer – sometimes taking as long as 90 days. One major variable in how long a cash-out refinance can take is whether the lender you’re working with has automatic authority. Lenders can apply for automatic authority from the VA to approve most loans without first submitting them to the VA. Most lenders (especially those who specialize in VA loans) will have this authority, but some reputable VA-approved lenders may not. If a lender does not have automatic authority, they will have to send the refinance application to the VA for prior approval before they can close on the loan. As mentioned above, if a loan must be sent to the VA for prior approval, it can add a week to the loan processing time.

 

Loans with special circumstances may have to be sent to the VA for approval regardless of whether the lender has automatic authority. Your lender should advise you on whether your loan is one of those cases, but if you have a unique circumstance or situation, you may want to bring it up with your lender directly to find out if it will need to be sent to the VA. It’s not a big deal if it does, it simply adds some time to how long the loan will take to process. Chances are your situation will not be dramatically affected if the loan takes a week longer than you expected. If you are worried about it, simply start the loan process a few weeks earlier than you necessarily need to.

 

In summary, if you’re using an IRRRL, don’t expect it to be faster than 10 days, but it should most definitely be faster than 30 days. If you’re using a cash-out refinance, expect around 30 days, but remember it might be as long as 45 days even if you are prompt in providing your paperwork. The biggest variable you can control is how quickly you respond to your loan officer’s requests for documentation and information.

 

FAQ- What can a Refinance be used for?

What can a VA Refinance be Used for?

 

Perhaps a better question would be what can’t a VA refinance be used for? However, we’ll stick to the original question and hope that we can cover all of the uses for a VA refinance in just one article. The VA has several different refinance options depending on why you’re refinancing, which help to diversify the VA loan program and make it more able to accomplish a variety of different purposes. A refinance can be used to get a lower interest rate, change the type of interest rate you have, change your loan term, get cash-out on the equity you have on your home, make a large lump sum payment to lower the principal in the loan, and consolidate higher-interest rate debt.

 

If you’re wanting to get a lower interest rate than what you currently have, your best bet is to use the Interest Rate Reduction Refinance Loan (IRRRL), which is the VA’s streamline refinance option. The IRRRL is optimized for the purpose of getting a veteran a lower interest rate and monthly payment if at all possible. Lower interest rates can also be secured using a standard refinance, but can take longer, be more expensive, and be more complicated. Either an IRRRL or a standard refinance can be used to change the type of interest rate you have. The different types of interest rates are fixed-rate, adjustable-rate, and hybrid adjustable-rate. Most people prefer the sense of security that comes with a fixed-rate mortgage, but those who take on a hybrid adjustable-rate nearly always save money compared to their fixed-rate counterparts.

 

If you want to change your loan term, you can do so with any type of VA refinance, but you will be limited in the case of an IRRRL. On an IRRRL, your new term cannot be more than 10 years longer than the original term of the loan, not to exceed 30 years and 32 days, of course. Where this can become problematic is when you’re wanting to refinance a 15-year mortgage to a 30-year: can’t be done with an IRRRL. The longest term you can refinance a 15-year mortgage to with an IRRRL is 25 years. With a cash-out or cash-in refinance, there are no such restrictions; you can refinance a 15-year to a 30-year or vice versa with no problem.

 

If you’re wanting to get cash-out on your refinance, most likely you’ll need to go with the aptly named cash-out refinance. An IRRRL does allow for an Energy Efficiency Mortgage to be added on, but EEMs are tightly regulated such that they money gotten from one must be used specifically for pre-approved energy efficient improvements on the home. No more than $6,000 is available on an EEM. EEMs are also available on cash-out refinances, along with the ability to take advantage of the equity you have in your home for any purpose agreeable to the lender. You can pay off credit card debt, purchase a new car, make an improvement to your home, or pay for your children’s college. Anything you can convince your lender is a worthy cause is open to you.

What to do with a Refinance

 

Talking a little bit more about consolidating debt, we really want to emphasize how big of an advantage this is. Some credit cards (especially ones that have a past-due balance), can have extremely high interest rates compared to your mortgage – it’s not unheard of for borrowers to be being charged 20% interest on some of their credit card debt. Taking equity out of your home to pay off that high-interest debt will make paying off your home take longer, sure, but will save you potentially thousands of dollars in saved interest. You should remember that auto interest rates are even lower than mortgages right now, so paying off your car with the equity in your home may not actually save you money, though it will certainly make paying bills less complicated.
Lastly, you can take advantage of a cash-in refinance to pay off a major chunk of principal in your loan. You can always make more than the minimum monthly payment, sure, but if you use a cash-in refinance to make a large lump sum payment, you can also refinance to a shorter term while still having a lower monthly payment. This can save you money because the amount of interest you pay is calculated on how much principal you have left – so if you have less principal left you’ll be paying less interest. This in turn lowers your monthly payment, which enables you to pay off more principal each month if you keep paying the same amount you did before the refinance.

FAQ Qualify for a VA Refinance

How Do I Qualify for a VA Refinance?

 

This is a great question, and has more to it than it might originally seem. There are two aspects to this question – what makes a borrower eligible for the VA loan program at all, and what types of VA loans are available to borrowers in different situations. A borrower who didn’t use a VA loan to purchase their current home will be looking at different options than a borrower who has already used a VA loan. Eligibility may be different for a borrower who has already purchased a home with a VA loan than for someone who has not yet purchased one.

 

VA Refinance QualificationsAt its core, qualifying for a VA refinance is very similar to qualifying for a new purchase VA loan. You will need to get a Certificate of Eligibility (COE), need to have sufficient entitlement for the loan you’re trying to take out, and you’ll need to have sufficient income and reliable employment. One of the differences between a veteran who has already used the VA loan program and one who hasn’t is the question of sufficient entitlement. A veteran who has not used the VA loan program before obviously has not used up any entitlement, but a veteran who has may run into issues in a cash-out refinance, depending on how much equity the veteran has in the home (generally this will only be a problem if the value of the home has increased substantially from what the borrower originally bought it for, so it’s a good problem to have). A veteran who has not used the VA loan program before can still get a refinance, but also must have sufficient entitlement available for the loan amount of the refinance – a veteran who used a conventional loan to buy a $1 million home and still owes $800k on it may have difficulty refinancing with a VA loan, depending on where he or she lives.

 

Anyone who is eligible for the VA loan program is also eligible for VA refinances – most veterans and surviving spouses of veterans who died in service or from service-related disabilities. However, an eligible borrower that is wanting to refinance a home from a conventional loan to a VA loan will not be able to qualify for an Interest Rate Reduction Refinance Loan (IRRRL) – the VA’s streamline refinance option. Only a standard refinance can be used to take a conventional or FHA loan to a VA loan. You can still get a lower interest rate with a standard refinance, it just won’t be as quick, easy, or cheap to do so. There are other concerns about qualifying for a standard refinance as well. If you’re trying to get cash out of the loan using the equity in your home, you may not qualify for the cash-out refinance if the purpose of taking cash out is not acceptable to the lender. The VA makes no judgment call on what should be considered acceptable or not – it’s completely up to the lender.
A veteran who purchased their home with a VA loan will have the same concern with a cash-out refinance: their reason for wanting cash will not be accepted by the lender. As mentioned above, if you qualified for a new purchase VA loan, you will not have trouble being eligible for either type of refinance – an IRRRL or a cash-out. The larger concern becomes which refinance type will best help you meet your goals for refinancing in the first place. Taking cash-out to add a pool to your backyard may or may not be approved on a cash-out refinance, but will certainly not be permitted on an IRRRL. If you have something unique in mind you’d like to do with the cash from a cash-out refinance, speak with your VA loan officer or contact us here at LowVARates to see if the purpose you have in mind is likely to be approved if you apply for a cash-out refinance. If it won’t work out, your loan officer will probably at least have an idea of what your options are elsewhere for funding. Your best bet is to be open and honest with your lender so he or she can best assist you in making a decision.

FAQ How Many Times can I Refinance

How Many Times can I do a VA Refinance?

 

How Many RefinancesThis is a question that most borrowers get the answer they want from. The reason is that there is no theoretical maximum placed on the number of times a borrower can refinance, or even how many years must be in between refinances. For most borrowers, that’s everything they need to know, but for those who have an itch for more information on the topic, we’ll dive in deeper here. The VA has a policy in place that a refinance cannot be approved unless there is “substantial net benefit” for the borrower. This benefit is often (but not always) a lower interest rate and/or lower monthly payment. The benefit can be an Energy Efficiency Mortgage (EEM), cash-out for a suitable purpose, or substantially lowered principal from a cash-in refinance. This policy, however, does place a number of practical restraints on the amount of refinances a borrower can do even though there is no theoretical limit. Those practical restraints make it difficult if not impossible to get substantial net benefit from a refinance more than two or three times during the life of a mortgage. These practical restraints include market conditions, the ever-changing lives of the borrowers, and the income of the borrowers.

 

Market conditions provide a great deal of practical restraints on the net benefit of refinances. For example, right now interest rates are at historic lows, but in 10 years from now, they will likely be higher. Since a lower interest rate is one of the most common ways to get a substantial net benefit from a refinance, 10 years from now it will be much more difficult to get benefit from a refinance simply because the market shifted. Going from a 4.5% interest rate to an 8% interest rate is the exact opposite of a net benefit. Market conditions also affect the value of your home, which will in turn affect how much cash you can get on a cash-out refinance. If you aren’t able to get a sufficient amount of cash out for the purpose you want it for, it’s very likely that there won’t be enough substantial net benefit to the refinance for it to be approved. The restraints brought upon by market conditions make the opportunities for highly-advantageous refinances less frequent.

 

Along with market conditions, the lives of the borrowers are constantly changing. You may not think of it as such, but deciding to move and buy a new home is a practical restraint on the number of refinances you do on a given home loan. If you no longer own the home, you’re not likely to get a refinance on it, are you? Also, if there is a divorce, marriage, or some other major event in the lives of the borrowers that is going to affect the obligors on the VA loan, the streamline refinance option, the IRRRL, is not likely to be available to you, which may limit your ability to do a refinance on the home, especially if you don’t have sufficient savings to pay the closing costs and VA funding fee on the standard refinance option. There are many practical restraints on how many times a refinance can be done on a home that stem from nothing but the lives of the borrowers themselves.
What can be considered part of the borrowers’ lives, but is also worth talking about all on its own, is the inconsistency of the borrowers’ own income and employment. Once you’ve purchased a home, you’re not going to lose the home as long as you’re making your payments on time. This is true even if you’ve since lost your job and are living on welfare and mercy checks from your rich, eccentric uncle. However, if you are living on welfare and mercy checks from a rich relative, you will almost certainly not qualify for a refinance because you’ll be subjected to the same scrutiny as you were when you first purchased the home. While this is an extreme example, a borrower whose hours were cut or a wife who stops working to have a baby can also affect the income of the household in a way that would disqualify you from having a refinance. In many cases, the VA streamline refinance option is still available to you, but often a standard refinance will not be.

IRRRL Terms

Oh, the Words You’ll Hear: Terminology for the VA Streamline Refinance

 

The VA’s streamline refinance option, called the IRRRL, is a fantastic opportunity for VA borrowers to take advantage of lower interest rates without costing too much. One obstacle that many borrowers face, however, is knowledge and understanding about the VA’s streamline refinance offering. In this article we’re going to go over some of the many terms that you might hear or read in connection with the IRRRL. Hopefully, after you get a solid understanding of these terms, you’ll be able to understand why getting an IRRRL is touted to be such a wonderful idea. You’ll also learn the circumstances where the IRRRL is not appropriate.

Hearing and Understand Mortgage Terminology

 

 

 

The first term we need to define is “streamline refinance”. Most people know what a refinance does, but not necessarily what a refinance is. It’s easier to understand the rest of the other terms if you first understand exactly how a refinance is defined. A mortgage is a type of loan that is secured by a real estate property (could be residential, or commercial). A refinance in the mortgage industry is when a new loan (totally separate from the existing loan) is used to pay off the existing loan and is secured by the same property. So, a refinance is a completely new loan, and as such, is usually subject to the same steps and process that a new purchase loan is. A streamline refinance is a type of refinance that is more directly related to the existing loan. In a streamline refinance, much of the underwriting information is taken from the existing loan, which speeds up the process considerably – hence the word “streamline”. In every loan program (conventional, FHA, VA), streamlines are mostly reserved for situations where most of the underwriting considerations have not changed much since the existing loan was underwritten.

 

Great, now we know what a streamline refinance is and does. In the VA loan program, the streamline refinance option is called the IRRRL, which stands for Interest Rate Reduction Refinance Loan. As you can probably tell from the name, the VA’s streamline refinance option is intended for borrowers who just want a lower interest rate on their mortgage. Getting a lower interest rate is good for two reasons: it saves you money over the life of the loan, and it saves you money every month because a smaller monthly payment will still be fully-amortizing.

 

Amortization is another word you will likely hear, both when you got your original loan, and when you get an IRRRL. This, like “refinance”, is a word that most existing homebuyers understand in context, but would likely have a hard time explaining. Understanding what amortization really means will help you make a good decision when thinking about an IRRRL. Amortization simply means paying off a debt (mortgage) over a fixed schedule. This schedule incorporates interest and calculates how much principal to add each month for the loan to be paid off at the end of the loan term. There’s a lot to say about amortization, but for you to understand the process of refinancing, you just need to know that “fully-amortizing” refers to a monthly payment that pays all of the interest owed for that month and all the principal needed to maintain the amortization schedule. In other words, if your monthly payment is $1000, and you pay at least that much (you’re not behind), then you’re making a fully-amortizing payment.

 

You’re also likely to hear the term EEM, or Energy Efficiency Mortgage, in conjunction with an IRRRL. An EEM is a possible add-on to your IRRRL that allows you to get an additional $6,000 to pay for energy efficient upgrades to your home (better insulation, new windows, etc.). An EEM can be great to save you money on your utility bills each month.
The terms equity, fair market value, and existing balance (also called remaining balance) may also come up. Existing balance is how much principal you still owe on the home, and fair market value is what the home can reasonably be sold for on the free market. Equity is calculated by taking the fair market value and subtracting the existing balance, and is the amount of money that would go in your pocket if you were to sell the home at the fair market value. When you’re getting an IRRRL, you are limited to the existing balance on the loan, and cannot get a loan for more than the principal still owed on the existing loan (except for the EEM and closing costs).

IRRRL Options

The Options to Choose From on an IRRRL

IRRRLs Options

What can you do with an IRRRL? What can’t you do? We’ll answer those questions in this article. You have some choices on the term of the new loan, what to do with closing costs, and even some say in your interest rate. You have some choices of add-ons that you can make, and what type of interest rate you have. If you’re interested in doing so, and have an amenable lender, you might even be able to choose a specialized type of amortization schedule. We’ll cover all of these choices, and make sure you know what your options are. Unfortunately, we won’t be able to go into too much detail, but a VA-approved lender can help answer any of your questions above and beyond what we cover here.

 

The VA allows borrowers getting an IRRRL to have some flexibility with their new loan term. As long as the term is no longer than either 30 years and 32 days or 10 years longer than the original loan term, you can work out the best term with your lender. For example, if your original loan is a 15-year term, the longest you can get an IRRRL for is 25 years. The term length you choose will affect the entire loan; your monthly payment will be affected, the amount of interest you pay over the life of the loan, and even the interest rate you will be offered.

 

The IRRRL also allows for a fair amount of choice on your closing costs. You obviously can’t choose to not pay them, but the IRRRL allows for all closing costs to be rolled into the loan amount instead of being due up front. Obviously, the disadvantage to that is that the closing costs will be added to principal and your interest is calculated off your existing principal – so you’ll pay interest on the closing costs if you don’t pay them up front. But in this way, the IRRRL is great for borrowers who don’t have thousands of dollars on hand to pay upfront closing costs and for borrowers who do have enough saved up. But when to pay them is not the only choice you have about closing costs.

 

You can also choose to pay for discount points to lower your interest rate. The lender sets the price for discount points, and you can decide whether it’s worth paying them or not. Even better, you can also choose to roll up to two discount points into the loan with your closing costs. You can pay for more than two discount points if you wish, but only two can be rolled into the loan amount. Be careful if you decide to do this, though, because the cost of the discount points, plus the interest you’ll pay on them as they are rolled into the loan, may be greater than the savings from the lower interest rate. The VA has done it’s best to give you as many options as possible with their streamline refinance option.

 

There are some things you can add onto your IRRRL, and some things you cannot. Generally speaking, you can’t get any money out of your IRRRL that isn’t to pay off the old loan you are refinancing, but there are one or two exceptions. You can choose to apply for an EEM (energy efficiency mortgage) along with your IRRRL, which can get you up to $6,000 extra to cover energy efficient upgrades to your home. You’ll need to provide detailed information to your lender about what you intend to spend the money on, and he or she will have to approve it. Energy efficient upgrades can be simple things like insulation, or new windows, or more extreme things like a new furnace or air conditioning system that is more efficient.
You can also make the choice between a fixed-rate mortgage, an adjustable-rate mortgage (ARM), or a hybrid adjustable-rate mortgage. A fixed-rate mortgage is a mortgage in which the interest rate is locked in place during the loan application process and remains the same throughout the entire duration of the loan. An adjustable-rate mortgage is a mortgage in which the interest rate adjusts each year based on what the market is doing. A hybrid ARM is a mortgage in which the interest rate remains fixed for a set number of years (usually 3-5), then begins to adjust annually after that. While an ARM and hybrid ARM may sound riskier, they nearly always result in saved money for the borrower.

Specific Questions on When You Can IRRRL

No, IRRRL is not some foreign version of the name Earl, though it does sound exactly the same. Technically, IRRRL is not a verb, either, but once you know what an IRRRL is, you’ll know what someone means when they use it as one. IRRRL stands for Interest Rate Reduction Refinance Loan. IRRRL is the VA’s streamline refinance option. A streamline refinance is where the information for a refinance is largely taken from the previous loan, cutting down on most of the time and grief associated with underwriting a loan. Streamline refinances are different from typical refinances because a typical refinance is handled nearly identically to a new purchase loan; you’ll need to get another credit check, fill out a whole application with income and employment information, the whole 9 yards. The VA streamline refinance option, known fondly as IRRRL, avoids most of that hassle and allows the lender to use existing information for the most part.

moneyandhome

Now let’s get specific. Let’s say we have a borrower who has been using a VA loan to pay off his house. He’s now in the process of refinancing his home with an IRRRL, but plans on renting the house later and is hoping to purchase an even bigger home with his VA loan benefits. Can he do this? Short answer: that depends. Long answer: start with the short answer and read on through the rest of the article. For our borrower (let’s call him Fred), there are a few important questions that need to be answered before he can get a definitive “yes” or “no” on his dilemma. One of the first questions we would need to ask Fred is how much of his VA loan entitlement he has left, if any at all. If the answer to this question is “not enough” or “none”, then we need go no further; Fred cannot get a bigger home after he IRRRL’s his current one.

If Fred gets past the first question, he faces another one: What is his current debt-to-income ratio and what would it become upon purchasing a second home with his VA loan benefits? The magic number here is 40, as in 40%. If either of the above debt-to-income ratios is above 40%, then Fred’s hopes and dreams get squashed like the frog from Frogger. These two questions really have one goal, and that is to ascertain whether Fred can really afford a second loan. If Fred can’t, then there’s no way he’ll be able to use his VA benefits to purchase another home. Of course, Fred’s probably wondering if the amount he’ll be charging tenants for rent on the first home can be used to offset his debt-to-income ratio. The answer to that question hinges on a far more important question: is Fred’s lender willing to work with him?

There are some specific rules regarding IRRRLs in the VA Lender’s Handbook, or VA Pamphlet 26-7. Essentially the rules say that the veteran’s entitlement will remain the same before and after the IRRRL. From the Handbook: “No additional charge is made to the veteran’s entitlement for an IRRRL; such as, the amount of the veteran’s previously used and available entitlement remains the same before and after obtaining the IRRRL.” In other words, if Fred has enough entitlement leftover to buy a second home before he gets an IRRRL, he’ll still be able to after his IRRRL. On the flipside, though, the original entitlement that Fred used to get the first loan will not be restored in any amount until the IRRRL is paid completely off.

So theoretically, if Fred has enough entitlement left to buy a second home, he will be able to get the bigger home he so strongly desires. However, we still have one big question to resolve: Will the lender work with Fred? This is not an automatic yes. If Fred can safely answer the first two questions affirmatively, the lender can still run Fred through the proverbial ringer and check out all his financial qualifications, credit scores, income information and any other compensating factors that may come into play, and is never obligated to approve a loan. That being said, if Fred can reasonably afford the loan and there’s not too much of a risk that he will default on either loan, the lender would be a fool not to allow it, because it means more money for him. Usually, if the borrower can financially handle the second mortgage, the lender will approve the loan and the borrower can purchase their second home.

The Rules on Refinancing When a VA Loan is Involved

Refinancing takes many forms, because there are many different situations in which a borrower would want to refinance. It’s not uncommon for a borrower to currently have a conventional loan and decide after a few years that it would be smart to use their VA loan benefits, so they refinance into a VA loan. Another situation might be that a borrower uses their VA benefits to open a new mortgage and would like to refinance using their VA benefits again. Both situations are common and not usually problematic to the borrower or the lender.

It makes perfect sense why someone would think that if they had a conventional mortgage the only option for refinancing is to refinance into another conventional mortgage. In fact, this was true for a long time, and only recently has it been changed to allow a conventional loan to be refinanced into a VA loan. As of the Veterans Benefits Improvement Act of 2008, this option has been available to VA-eligible borrowers who either already had a mortgage by the time they became eligible for a VA loan or opted not to use their VA benefits at first. It’s also possible for a VA loan to be refinanced into a conventional loan, but seeing as how this never provides the borrower with any benefit, not much detail is given on that option. From the VA: “Veterans with conventional home loans now have new options for refinancing to a VA- guaranteed home loan…These new options are available as a result of the Veterans’ Benefits Improvement Act of 2008, which the President signed into law on October 10, 2008. Veterans who wish to refinance their subprime or conventional mortgage may now do so for up to 100 percent of the value of the property, which is up from the previous limit of 90 percent.”

As you can imagine, this is exciting news for veterans everywhere because it gives them more flexibility in using their VA benefits, as well as making the benefit even more substantial than it already was. To refinance from a conventional loan to a VA-guaranteed loan, the process is much like a conventional to conventional refinance combined with opening a new VA mortgage. In other words, there’s a lot to it. Someone refinancing to a VA loan will be met with a standard loan application, the normal credit checks and employment and income verifications, as well as all of the hoops of getting a new VA loan, including getting a Certificate of Eligibility (which you’ll need to do first thing), having an official VA appraiser appraise the value of the home, and all of the other wonderfully enjoyable steps to getting a VA loan.

However, don’t let those things stop you or even delay you in refinancing to a VA loan. The benefits available in a VA loan are substantial and can save you thousands of dollars a year in interest savings and lower monthly payments. For a conventional to VA refinance, the streamline refinance option offered by the VA, the Interest Rate Reduction Refinance Loan (IRRRL), is not available. The IRRRL is only available if the refinance is a VA loan to VA loan refinance. The borrower should also be prepared to expect that the refinance to a VA loan is going to use his or her entitlement amount. Each veteran only has a certain amount that they are eligible to have guaranteed by the VA, and the amount you refinance for will, in most cases, cut into that amount.

If you’ve used your VA benefits before, in order to use them again or refinance a conventional mortgage to a VA loan, you’ll need to furnish proof that you’ve completely paid off any amount owed on a VA loan that was previously opened. This proof can easily be combined with the application for restoration of entitlement. There’s a lot of flexibility built into the VA loan system – especially with refinances. This flexibility is intended to offer a variety of options for any kind of situation so that the veteran can choose the best option for them. In order to make sure you make the best decision for your new VA loan or refinance, consult with your loan officer or a VA-approved lender to get accurate and complete information on what your choices are.

Using a Streamline Refinance – What’s the Maximum You Can Get?

The VA has a streamline refinancing option available to VA-eligible borrowers. The VA’s streamline refinance option is called the Interest Rate Reduction Refinance Loan, or IRRRL for short. Refinancing a mortgage essentially means getting another mortgage that pays off the existing one and starts anew, usually with a lower interest rate. Refinances can also result in less principal to pay off if the buyer puts cash in, or a lump sum for the buyer to have as extra money for another purchase if the buyer wants to take cash out. A streamline refinance is different from a regular refinance option in that the loan application information from the original loan is largely re-used, making the underwriting process and the amount of fees involved with the refinance much smaller.

Refinances, especially streamline refinances, vary in process and requirements for each type of loan and even from lender to lender. For a VA loan, regardless of what kind of loan you have (ARM, Hybrid ARM, fixed-rate, etc.) the streamline refinance option available to you is the IRRRL. The day you apply for a new mortgage on a new home you’d like to buy, you’re most likely not thinking much about the time when you’ll be refinancing that loan, unless you’re quite the forward thinker. After life happens and tough economic times hit, a streamline refinance option may be the thing that helps you make ends meet, or just make life for your family a little more comfortable. Refinances, especially a VA streamline refinance, can get you a lower interest rate and lower monthly payments, easing the burdens on your bank account.

The VA takes care of those paying off VA-guaranteed loans. It is actually required for a streamline refinance to provide a certain level of “net tangible benefit” to the borrower. Which means that if you use an IRRRL on a VA loan, you must have either a lower monthly payment or some other form of net tangible benefit that you receive as a result of getting the IRRRL. This is just another way that the VA helps look out for its veterans. But just how large can this net tangible benefit be? How much can the IRRRL be used for?

Back to the new first-time home buyer who is just applying for their VA loan for their home. This person is wondering what the maximum amount he can get for his loan is. Generally speaking, VA loans are limited to what the appraiser deems to be the reasonable value of the property, as well a relatively small amount for energy efficient upgrades to the home and the VA funding fee. Per the VA lender’s guide: “the amount of the loan to the reasonable value of the property shown on the Notice Of Value plus the cost of energy efficiency improvements up to $6,000 plus the VA funding fee”.

Knowing that, we can establish a pretty reasonable expectation for how much an IRRRL might be approved for. An IRRRL is very similar to a regular loan, with some differences. Instead of the reasonable value of the home as the base amount, an IRRRL uses the amount that the borrower still owes on their current VA loan. In addition, another $6000 of energy efficient upgrades can be added onto the amount, as well as certain allowable fees and charges, two discount points, and the VA funding fee. Those additional items will bring your monthly payment up even as a better interest rate brings it down, so it may be a toss-up whether you decide it’s worth it. It comes down to the purpose of refinancing in the first place.

Remember that if your monthly payment increases by more than 20% as a result of the IRRRL, the VA requires that a new credit check be completed using current information. That’s an extra step and hassle, and it may significantly affect the interest rate you get offered. It’s important to evaluate how many ‘extras’ you can handle and still have mortgage terms that will serve you and your family best in the long run. As always, if you have more questions, seek the advice of a VA-approved lender.

VA’s Streamline Refinance Program

The VA’s Streamline Refinance program, also known as a “VA to VA” loan or Interest Rate Reduction Refinancing Loan (IRRRL), allows you to lower the interest rate on your mortgage with few or no out-of-pocket costs. This is only available to you if you have already used your eligibility for a VA loan on the property you intend to refinance, and is probably the best option for you if you just want to refinance your existing loan at a lower interest rate.

There are advantages to having an IRRRL.  As was mentioned before, you can refinance your existing VA loan to a lower interest rate.  This loan can be done with “no out of pocket money” by including all costs in the new loan.  The VA does not require an appraisal, income or employment verifications, or a credit report or termite report, as long as the current mortgage has been paid as agreed for the last 12 months and is up to date at the time of refinancing.  You are also allowed to include up to $6,000 in your refinancing loan for the purpose of energy efficient home improvements.

Except when refinancing an existing VA guaranteed adjustable rate mortgage (ARM), which is an interest rate that periodically adjusts based on an index from the lender, to a fixed rate, it must result in a lower interest rate, or you will not qualify.  When refinancing from an existing VA ARM loan to a fixed rate, the interest rate may increase.

Below are some tips and facts that you should keep in mind when trying to decide whether this type of refinance is right for you:

·        Although no appraisal or credit underwriting package is required by VA, your lender may require an appraisal and credit report anyway.

·        A certificate of eligibility is not required from the VA.  Your lender can use the VA’s e-mail confirmation procedure for interest rate reduction refinance in lieu of a certificate of eligibility.

·        Although a Streamline loan may be done with “no money out of pocket” by including all costs in the new loan, you could also make the new loan at an interest rate high enough to enable the lender to pay the costs.  But remember, the interest rate on the new loan must be lower the rate on the old loan unless you refinance an ARM to a fixed rate mortgage.

·        No lender is required to make you a IRRRL, but any lender of your choice may process your application for an IRRRL.

·        While it may be the best place to start shopping for an IRRRL, you do not have to go to the lender you make your payments to now or to the lender from whom you originally obtained your VA loan.  In fact, Veterans are strongly urged to contact several lenders. There may be big differences in the terms offered by the various lenders you contact.

·        Some lenders may try to contact you and fool you into thinking that they are the only lender with authority to make IRRRLs.  Remember, any lender may make you an IRRRL.

·        An IRRRL can be done only if you have already used your eligibility for a VA loan on the property you intend to refinance. It must be a VA to VA refinance, and it will reuse the entitlement you originally used.  You may have used your entitlement by obtaining a VA loan when you bought your house, or by substituting your eligibility for that of the seller, if you assumed the loan.

·        The occupancy requirement for an IRRRL is different from other VA loans.  When you originally got your VA loan, you certified that you occupied or intended to occupy the home.  For an IRRRL, you need only certify that you previously occupied it.

·        The loan may not exceed the sum of the outstanding balance on the existing VA loan, plus allowable fees and closing costs, including funding fee and up to 2 discount points.  As previously mentioned, you may also add up to $6,000 of energy efficiency improvements into the loan.

Some lenders offer IRRRLs as an opportunity to reduce the term of your loan from 30 years to 15 years. While this can save you a lot of money in interest over the life of the loan, if the reduction in the interest rate is not at least one percent (two percent is better) and lots of new loan costs are rolled into the new loan, you may see a very large increase in your monthly payment.  So research which IRRRL, or Streamline refinance, is better for you!

 

Refinance Your Mortgage to a VA Loan

There are a lot of potential advantages to refinancing your mortgage. Often you can get a lower interest rate, resulting in lower monthly payments. Sometimes you can get what they call ‘cash out’ for improvements or repairs to the property, and can even adjust the length of the mortgage between 15 and 30 years. So refinancing can be a good idea in and of itself, but those advantages are augmented when you refinance into a VA loan.

 

A VA loan is a loan that is backed (guaranteed) by the Department of Veterans Affairs. One of the things that make a VA loan so great is the ability to refinance a non-VA loan into a VA loan so long as you are eligible for a VA loan. Refinancing into a VA loan can bring many other good changes into your mortgage. For example, VA loans do not require the usual mortgage insurance premiums for over 80% Loan to Value (an extra charge each month when you have more than 80% of the principal to still pay back, as “insurance” for the lender against the possibility of you defaulting).  VA loans also do not penalize you for prepayment, which means that the sooner you can pay the money back, the better off you are. Having your mortgage through a VA loan also makes selling your home easier; if you sell to another VA eligible person, the VA loan can transfer directly to them.

 

The VA loan program was originally implemented in 1944 as part of the original G.I. Bill. VA loans were implemented to address the needs of servicemembers returning home from combat and needing to be able to buy a home. Over time, eligibility requirements for VA loans have broadened to include many more categories of people. Today, most who have completed a term of active service are eligible, though the length of the term of service depends on when the service took place. Generally, for post Vietnam-era veterans, the requirement is 24 months of continuous service or between 90 and 181 days of active duty. Veterans of the Vietnam era and earlier must have completed at least 90 days of active duty.

 

Veterans who were honorably discharged for reasons beyond their control, such as service-related disability, reduction in force or other reasons can have the term of service requirement waived. Some non-veterans are also eligible for VA loans. Current servicemembers can be eligible if they’ve met the 90 days of active duty requirement. Spouses of servicemembers can be eligible if their spouse is MIA or POW, or if their spouse was killed in action. Reservists and National guard members can be eligible after 6 years of service in their respective branches.

 

For those eligible, the VA loan is insured by the Department of Veterans Affairs, which can mean that the VA will insure up to 1/4 of the loaned amount in the event the borrower falls behind on payments. In recent years, approximately half of all VA-backed loans have been linked to a refinance. So if you’re looking to refinance your mortgage using a VA loan, these are some steps to follow:

 

1. Make sure you’re eligible for a VA loan. Most servicemembers or veterans who have served for a continuous 24 month period will be eligible for a VA loan.

 

2. Obtain a Certificate of Eligibility (COE). A COE is a document that proves you are eligible for a VA loan, and can be obtained through any VA approved lender. If you are refinancing from an existing VA loan to a new VA loan, you need not obtain another COE; your previous COE will carry over to the new loan.

 

3. Make sure the property you are wanting to refinance is eligible for a VA loan. There is an occupancy requirement for VA loans, which means that rental properties and vacation homes are generally not eligible. Some exceptions apply where the borrower is living in one of the plots of a multiplex and renting out the other plots, or when refinancing a mortgage for a home that was once lived in by the borrower but is no longer.

 

4. Calculate the closing costs. All of the “administration fees” associated with refinancing a mortgage need to be factored in. In the case of a VA loan, often the closing costs can be added to the loan amount, making it part of what is paid off each month. VA loans also tend to have fewer associated closing costs than traditional loans.

 

5. Finally, pick which VA loan you feel is appropriate for you. It is advantageous to shop around between VA approved lenders to make sure you’re getting the most appropriate loan for the most affordable price. Don’t sign up for anything you don’t fully understand.

Time May Be Running Out To Refinance

Have you considered the VA IRRRL but haven’t refinanced yet?  Well your time may be running out.  Fed Chairman Ben Bernanke discussed how the central bank might wind down is financial easing policy and that set off a spark of activity in the markets.  He stated that the Fed could scale back the pace of its bond purchases at one of the “next few meetings” if the economic recovery looked set to maintain a forward momentum.  As a result of his statements, interest rates rose and the mortgage industry braced for the worse as overall application activity was down 8.8 percent and refinance applications were down 12.3.

Consider the following benefits of the VA IRRRL and ask yourself, “Why haven’t I taken advantage of this yet?”

The VA Streamline refinance home loan is without a doubt the best mortgage refinance loan on the market. No other refinance loan program is as simple and easy to qualify for and there are so many unique benefits that come along with it. Although, In order to do a VA Streamline refinance, your current loan must be a VA home loan.

One of the biggest benefits of the VA Streamline refinance is that you do not have to go through credit qualification.  There is absolutely no need for lenders to pull your credit history and look at your scores. However, your existing mortgage must be current and you cannot have had any more than one thirty- day late mortgage payment within the last 12 months. In order to do a VA Streamline refinance, your current loan must be a VA home loan.

Another benefit is that the regular underwriting process does not apply. Your lender is not going to check to see how much money you make. So you do not need to send in bank statements, W2’s, paychecks, etc. Since you have been making your mortgage payments, they know that you have the means to keep it up. Along with this, lenders are not going to be calling your employer to make sure that you are still working with them before considering giving you a loan. With a VA Streamline refinance a income verification is no issue to you at all, since they will not be doing that.

VA Streamline refinances in most cases can allow you to arrange your refinance to be completed with absolutely no out of pocket expenses. All of the closing costs and pre-paid can be rolled into the new loan amount and on top of that there is no appraisal required. As you can see there are so many unique benefits of a VA Streamline refinance as listed above, if it sounds like this is for you, take advantage of this amazing opportunity.

But is the refi boom really over?  Well according the Mortgage Bankers Association, it’s starting to wind down as they are reporting a decline in mortgage applications.

“”We have been expecting that refinancing volume would drop pretty sharply in the second half of 2013,” said Mike Fratantoni, the MBA’s vice president of research and economics.  “This refinancing boom has been going since late 2008, early 2009. The best credit borrowers have been able to refinance a couple of times. As rates tick above those levels, that group of borrowers is no longer going to have an incentive to refinance.”

Fratantoni expects refinancing of mortgage applications to drop significantly from current levels “to below 50 percent before the second half of the year,” he said. “Right now our forecast is a 74 percent refinancing share in the first quarter, 67 percent in the second, 46 in the third, and 42 in the fourth.”

In 2014, refinancing applications will account for about 36 percent of all mortgage applications— which is less than half of their current stake.

So is it time to panic and rush into anything?  Maybe, maybe not.  Not everyone is pessimistic on what the market is going to do.

Bob Walters, the chief economist at Quicken Loans says the following. “I think the Fed will hold strong to make sure the economy is on solid footing.  I think we’re good through 2013, going beyond that, it starts to get a little fuzzy.  The market’s starting to price some of that uncertainty in.”

By the end of this year we could see rates higher but not by a lot.  Rates could hover anywhere between 4.25 and 4.75 percent on a 30 year fixed mortgage which is up from the current par pricing of 3.75 percent.  We could see refi’s drop to half or slightly more than that of all mortgage applications by the end of the year.

Even though refinance application are down nationally, we are beginning to see that loan customers are considering different loan products, namely adjustable rate mortgages because they offer such low rates for periods of up to 7 years on a VA Hybrid.

Consider the following: Most 30 year mortgages are only on the lenders books for a period of 5 to 7 years before the consumer refinances again.  With VA Hybrid rates at or below 3.5% they are a great option for anyone looking to lock in savings.

In closing:

The current market condition is a “good-news, bad-news” situation.  The economy seems to be finally see an improvement and getting its legs back.  As a natural course, interest rates are going to be going back up.  For any homeowners that are still waiting for interest rates to fall even further, that time may have passed. If you continue to wait until the end of the year to refinance you may end up with a rate that is much higher than it is today.  Whether you decide to take advantage of the current 30 year rates, reduce the term of your loan or go with an adjustable rate mortgage, it may be time to pull the trigger on refinancing if you haven’t done so already.

Understanding the VA Streamline

The VA Streamline Loan, or Interest Rate Reduction Refinance Loan (IRRRL) is the
fastest and easiest way to lower your monthly mortgage payment by reducing your current interest rate. With VA interest rates at all time lows, this simple process could easily save you hundreds of dollars each month and thousand over the life of your loan!

If you currently have an adjustable rate mortgage (ARM), you can also refinance and
convert it into a fixed rate mortgage.

What are the benefits of a VA Streamline Loan?

The VA Streamline Loan is designed to quickly and seamlessly reduce your interest rate
to lower your monthly payments and put more money in your pocket each month. With
the VA Streamline Loan, you are streamlining your existing VA loan. As a result, there
are no credit checks, no appraisals, no inspections, no upfront expenses, no
current occupancy requirements, no Certificate of Eligibility. Since the VA
Streamline Loan eliminates these common loan origination fees and requirements, you
are able to refinance your home quicker and for less money!

Who qualifies for a VA Streamline Loan?

Anyone who has a current VA loan qualifies to refinance their existing loan using the VA
Streamline Loan. Refinancing your VA loan will reuse the entitlement you originally
used. A new Certificate of Eligibility (COE) is not required. It is important to note that
the occupancy rules for a VA Streamline loan only require that you previously occupied
the home. You do not need to currently occupy the residence.

Can I get money back on this loan?

While you may not receive any cash from the loan proceeds and “cash out” using the
VA Streamline Loan, you do receive a refund on your existing escrow account and you
can skip up to two monthly mortgage payments, so essentially, you will receive money
back to use as you wish.

What if Iʼm a disabled Veteran?

Veterans who are receiving compensation for a service-connected disability or would
be entitled to received compensation for a service-connected disability if they did not
received active duty pay or retirement pay are not required to pay the VA funding fee.
Surviving spouses of a Veteran who died in the service or from a service-connected
disability may also waive the VA funding fee.

How do I get started?

If you are a Veteran and have not refinanced lately, you should seriously consider
refinancing your existing mortgage using the VA Streamline Loan. With VA Rates at all
time lows you should apply today to lock in your new low-interest rate and start saving
Potential hundreds of dollars each month and thousands of dollars over the life of your
loan! A simple loan application will start the process and allow us to lock in your new
Low-interest rate. There are no upfront expenses to take advantage of the VA
Streamline loan, so apply today and take advantage of this loan that was custom made
for borrowers who want to save money and get a lower interest rate fast!

VA Streamline: Rock Bottom Interest Rates

Save Military Personnel Possibly Hundreds Monthly

Many Americans are trying to save money any way they can. Cutting costs by stretching their dollar on food, clothing and medicine helps. But, being able to reduce large expenses on a monthly basis, would be the most help. A lot of people have refinanced their homes. Now, with the VA interest rates hitting close to or being at rock bottom, active or inactive servicemen and women who currently have a VA loan, can save big money every month. They can refinance their existing VA loans under the VA Streamline Refinance Program.

A 620 FICO Score or Home Appraisal No Longer Needed

If you have already tried to refinance under this loan program and failed, it would most likely benefit you to try to refinance again. As of April 18, 2011, the rules have changed for refinancing with the VA Streamline Refinance Program. Previous failed attempts might not be a problem for you now. This loan addresses the difficulties with your current VA loan being more than what your home is worth.

Some VA interest rates are as low as 2.75 percent with an APR of 2.45 percent. These rates are historically at low amounts. In many cases, hundreds of dollars can be saved each month on your mortgage payment.

Quick and Easy Loan Approval

The VA Streamline Refinance Program is designed for active and inactive military personnel to take advantage of the very low-interest rates. It was set up to make it easy and quick. Also, there are some places that will pre-approve you in just 60 seconds.

Other qualifying features that this loan has are:

Your existing VA loan has to be up to date on its monthly payments. You can not be behind.

There cannot be more than one-30-day late mortgage payment made on your existing VA loan within the last 12 months.

Employment and income verification will probably be needed.

A refund of your existing escrow account can be made to you.

You cannot receive any cash back funds from the refinance.

After the loan is approved, you can skip up to two monthly payments.

American military personnel and their families can widely benefit from the VA Streamline refinance of their existing VA loan, especially since the VA interest rates are very low. It will just save a lot of money each month for them. They can use the financial boost to help get caught up on other important bills. Families can stop skimping on their food, clothing and medicine expenses. Reducing monthly mortgage expenses will ease the money crunch that seems to be never ending.

Lower Your VA Interest Rate Today With A Streamline Mortgage

Your mortgage payment is probably the most expensive payment you make every month. The reason for that high payment is the interest rate. This means that if you can lower your VA interest rate, then you can save money. In our current state of economics, or anytime for that matter, saving money is always a good thing.

If you are a Veteran, you’ve served your country and are rewarded with certain benefits that the rest of America isn’t eligible for. One of these benefits is a VA loan on your mortgage.

Unfortunately, you may not have gotten the best possible rate the first time around. That’s why the federal government is looking to boost the economy and help veterans with a VA streamline loan. This loan is actually an interest rate reduction refinancing loan that you can qualify for as long as your current home mortgage was financed with a VA loan and your current interest rate is above 5%.

Your VA interest rate can be reduced dramatically. Depending on what your current home is worth, what the amount your current loan is for, as well as some other basics, like credit history and such will give you a monthly saving that you can’t pass up. A 1% reduction in the VA interest rate will result in anywhere between $100 and $600 per month savings. Per month! That means that just by refinancing your mortgage loan you save thousands of dollars a year.

Many mortgage companies charge you money out of pocket to refinance a loan. However, as a Veteran, this is another benefit you need to take advantage of. Any closing costs and pre-pays can be added to the new loan, which means you don’t have to pay anything up front. The process can take only minutes and the ability to qualify is very easy.

The VA interest rates are some of the lowest in the country right now. Most mortgage companies can’t come close to these rates and best of all, they’re permanent. Other companies may offer you a low rate, but it’s an adjustable rate, which means that while it’s good now, it might not stay that way. The VA streamline mortgage is a low, fixed rate loan that keeps your savings high and your payments low for the length of the loan. You can’t afford not to take advantage of this great opportunity.

A streamlined mortgage loan is the best way for you to save money and lower your VA interest rate. The federal government is trying to turn the economy around and this is their way of helping all of the veterans. If you like saving money and have a current VA mortgage, then this is the refinancing option you want to be a part of.

Copyright © 2017 Low VA Rates, LLC™. All Rights Reserved. We are not affiliated with any government agencies, including the VA, FHA, or the HUD. All our approved lenders are authorized VA, FHA and or Fannie Mae or Freddie Mac approved. Click on these links to access our Privacy Policy and our Licensing Information. Consumer NMLS Access - NMLS #1109426