These low rates: they’re a blessing and a curse.
On the one hand, low rates help borrowers reduce a monthly mortgage payment, afford more “house”, and pay astoundingly less interest over the life of a loan.
But on the other hand, those low rates can easily instill panic in a potential refinancer. Scared to miss out on the next rate drop, nervous consumers sit on the sidelines and wait. And wait. And wait. Too panicked to act, these antsy homeowners stand to miss out on a pretty awesome time in mortgage history.
Don’t be a Nervous Nellie. If the time is (fairly) right for you to refinance, keep this tidbit in mind: the commitment rate for a fixed 30-year loan has averaged under 4 percent since late 2011, according to Freddie Mac.
The last time rates were that low? Never. We’re at a historically amazing time in terms of mortgage rates. It’s time to act!
The Two Options
The Department of Veterans Affairs offers two refinance options:
- The VA Streamline / Interest Rate Reduction Refinance Loan / “IRRRL”
- The VA Streamline can be used to refinance a current VA loan at a lower rate.
- The VA Cash-Out Refinance Loan
- The VA Cash-Out Refinance Loan can be used to refinance any non-VA loan into a VA loan.
Ready to look at VA refinance loans in more detail? Plunge on.
The VA Streamline (IRRRL)
THE RULES: Fortunately for military homeowners, the VA makes it fairly easy to refinance a current VA loan. The Streamline requires that current VA loan-holders:
- Refinance to a lower rate
- Not remove any home equity
- Verify either current or previous primary-occupation of the property
- Have no late mortgage payments (of 30 days or more) in the last 12 months
THE BENEFITS: The Streamline refinance features several key benefits, including:
- Inexpensive closing costs
- No need to obtain a new Certificate of Eligibility (COE)
- Appraisal may not be necessary
- Little paperwork
THE PROCESS: Obtaining a VA Streamline is akin to a “streamlined” version of the original VA purchase loan process. It’s typically a quick, seamless process. VA loan-holders can either choose a new VA lender or work with their current lender. The lender of choice may initiate a credit check and/or appraisal, and provided all requirements are satisfied, the loan moves quickly to final approval.
THE FEES: The closing costs associated with a Streamline Refinance can typically be rolled into the loan. Those costs can include the VA funding fee (0.5 percent of the loan), title charges, recording fees or origination costs, but generally don’t need to be paid up-front.
The VA Cash-Out
THE RULES: Think of the VA Cash-Out Refinance as an umbrella loan. The overarching reach of the VA Cash-Out allows qualifying homeowners to refinance any type of loan into a VA loan. Eligible applicants must:
- Meet service requirements
- Meet credit standards (keep in mind that VA loans feature relaxed credit guidelines when compared to conventional loans)
- Meet VA appraisal guidelines
- Verify intent to personally occupy the refinanced property
- Have no late mortgage payments (of 30 days or more) within the last 12 months
THE BENEFITS: Wasn’t it thoughtful of the VA to allow non-VA loan-holders access to the incredible benefits of the VA loan program? Those benefits include:
- 100 percent financing
- No private mortgage insurance
- No prepayment penalties
- Access to home equity (with Cash-Out Refinance)
THE PROCESS: Unlike the Streamline, the Cash-Out Refinance automatically requires a credit check, income verification and VA appraisal. Your VA lender initiates each of these processes, and provides constant updates along the way. Homeowners decide how much cash to remove from the home’s equity (if any). Assuming the home meets VA appraisal criteria and the borrower meets eligibility criteria, the refinance loan moves to underwriting, then to closing.
THE FEES: The fees of a Cash-Out Refinance are similar to those incurred by the Streamline option. One key exception is the VA funding fee:
Keep in mind that as with a Streamline Refinance, a Cash-Out Refinance allows homeowners to roll all fees into the loan.
On that positive note, let’s recap. Can a VA Refinance really provide:
- A “no-out-of-pocket-costs” experience? Yep.
- The signature benefits of VA financing? Sure.
- The perk of a lower rate and/or access to home equity? You bet.
Ready to get started?
VA Refinance Now to Take Advantage of Current Rates
The best way to start the VA Refinance process is with an experienced VA lender. As the nation’s #1-dedicated VA lender, Veterans United can connect homeowners with either a VA Streamline or a Cash-Out Refinance loan.