Benefits of the VA Home Loan for Orange County Veterans

The benefits of the VA Home Loan for Orange County Veterans are numerous. The VA loan program is an amazing mortgage program that has less restrictive guidelines and underwriting flexibility compared to any other loan program. Some of these benefits include no down payment, no monthly mortgage insurance and competitive fixed interest rates.

VA Loan Benefits

https://www.youtube.com/watch?v=kwzuRd7vdLQ

No Down Payment Required

One of the biggest and most noticeable benefits to the VA loan program is that there is no down payment up to county loan limit. For example, in Orange County the VA loan limit is $679,650, which means a veteran is able to get a VA loan with zero down payment up to a $679,650 purchase price (2018 loan limit). Veterans are able to get a VA loan above the limit, but they would then have a down payment as a result. A loan above the Zero Down limit is called a Jumbo VA Loan and is also fairly common in Orange County due the the high cost of homes.

Competitive Fixed Interest Rates on VA Loans

VA Loans tend to have lower fixed rates than other types of loan programs. VA interest rates are typically .25% or more lower than comparable rates for Conventional financing. These lower rates also make it easier for the lender to offer a lender credit to help cover closing costs. By adjusting the interest rate slightly higher, a lender credit can save the Orange County Veteran thousands of dollars in out of pocket expenses when purchasing a home. Also, the VA loan does not have a prepayment penalty, making it easy to take advantage of the VA Interest Rate Reduction Refinance Loan (VA IRRRL) if rates drop.

The VA loan program is also one of the only programs that allows for loans to be assumable when purchasing a home. This means that when a home is purchased, the buyer can take over the sellers mortgage under the same terms. Besides FHA, no other loan program provides this benefit.

No Monthly Mortgage Insurance

No monthly mortgage insurance is one of the best benefits of a VA loan. For other types of financing, including FHA and Conventional loans, when the down payment is less than 20% of the purchase price there will be some form of mortgage insurance. With FHA, no matter what the down payment is there will be monthly mortgage insurance. for example, an Orange County home buyer purchasing a home for $600,000 would need a 3.5% down payment with FHA.  That is a $21,000 down payment. VA would have No Down payment. On the FHA loan the mortgage insurance would be calculated using a factor of .85% of the loan amount divided by 12. The monthly mortgage insurance would be approximately $417, paid every month. An Orange County Veteran purchasing the same home would have no monthly mortgage insurance, saving $417 per month versus the FHA loan.

Underwriting and Credit Flexibility

The VA loan program is also the most flexible home loan program when it comes to credit and debt to income ratios. Many lenders will close VA loans for borrowers with FICO scores as low as 580. Also, VA financing is allowed only 2 years after a bankruptcy or foreclosure. FHA requires 2 years after a bankruptcy and 3 years after a foreclosure.  Conventional loans require a 4 year wait after a bankruptcy and 7 years after a foreclosure.

Cash Out Refinance using the VA Loan

A great benefit of the VA loan is as a washout refinance. VA allows cash out up to 100% of the property value. For an Orange County Veteran looking to do home improvements, being able to pull cash out to 100% of the new appraised value means the home improvements can be completed much sooner than someone in another type of loan program. FHA allows cashout to 85% of the property value, and conventional financing only goes to 80%.

Understanding your loan options is important. A Veteran should always consider the VA loan as their first option. There are few scenarios where VA will not be better than another type of loan program. To see the numbers, have your Orange County VA loan officer prepare a Side by Side Analysis comparing the VA loan to other loan options, which will help the Veteran see the numbers and make the correct home financing decision.

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.OrangeCountyVALoans.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

VA IRRRL Refinance is Popular in Orange County

VA IRRRL in orange countyThe VA IRRRL program, also known as the VA Interest Rate Reduction Refinance Loan, or VA Streamline refinance, is very popular as we start 2015. With interest rates hitting two year lows at the beginning of the year Orange County VA borrowers are able to take advantage of the rate drop by utilizing the IRRRL program. The IRRRL is the easiest type of refinance a homeowner will ever go through, which is why many VA borrowers may refinance more than once if interest rates continue to drop.

FAQ’s for the VA IRRRL Program

Q: Who is Eligible for a VA IRRRL?  Anyone that currently has a VA loan is able to refinance using the IRRRL program if they are lowering their interest rate and payment. While there are a few rules and guidelines, generally whoever is currently on the VA loan must also be on the new VA loan.

Q: How difficult is the loan process? The loan process is extremely easy, especially when compared to the loan processing involved in initially getting a loan to buy a home. With the IRRRL program there is no income documentation and no appraisal. The lender will most likely need to verify that at least one of the borrowers has a job, but income is not verified. No tax returns, paystubs, etc. A credit report is run, but primarily just for the mortgage rating and FICO score. A borrower’s FICO score will have some bearing on the interest rate of the new loan, but some lenders will allow FICO scores as low as 580, while some may make an exception for FICO scores lower than 580.

Q: How much does it cost to do an IRRRL? It depends. Many lenders will offer “No Cost” options, where a lender credit is used to cover the closing costs. It is even possible to get enough lender credit to cover the new impound account. But it is also possible to choose a lower interest rate and have closing costs added into the new loan amount. It is important to carefully review each of these options and make sure you are choosing the best IRRRL loan scenario based on your long and short term financial goals. For example, if you think you may move from your home within the next few years, then it would probably make more sense to go with a No Cost scenario, where the breakeven is immediate, versus a scenario with closing costs where the breakeven could be several years out. A good VA IRRRL Lender should be able to prepare loan scenarios and a Side by Side Total Cost Analysis to make sure you see the pro’s and con’s of each option.

Q: How long does it take to close an IRRRL? This depends on the lender. It also depends on how quickly the borrower sends the initial signed paperwork back to the lender. The typical time period to close a VA IRRRL is less than three weeks.

Q What happens to the impound account/escrow account on my current VA loan? After the IRRRL refinance closes your old lender will refund the balance of your impound account back to you. Normally they will send a check that should be received within 30 days of the closing. It is important to realize that as part of the new loan a new impound account for taxes and insurance is set up. The borrower has the option of bringing in money for the new impound account or financing the new impound account into the loan. Either way, they will be receiving a refund of the old impound account after closing, which will act as a reimbursement of the impound account they just set up.

How Do I Know if Interest Rates are Low Enough to do an IRRRL?

You will probably know it’s worth some investigation into the IRRRL program if you are receiving an influx of advertisements in the mail. And of course if the media begins talking about a drop in interest rates then it may be worth a look. Many of the advertisements sent in the mail can be very deceptive, offering extremely low interest rates that may or may not be available, and at a huge cost. For the lenders advertising in this manner it can work if it just generates a phone call. But working with a lender that pulls in VA IRRRL phone calls in this manner is not where your rate shopping should end, because not all lenders are the same.  It is important to talk to a local Orange County VA loan specialist who can prepare a custom Side by Side Total Cost Analysis, which will give a thorough breakdown of several IRRRL scenarios compared to your current loan. Going through this type of Analysis can save you thousands of dollars by helping you to make sure you are choosing the right loan scenario.

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loans.  MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com. I will prepare custom VA IRRRL loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Why VA Loan Refinancing in Orange County is Popular

VArefinanceAs we begin 2015 a wave of VA refinance activity in Orange County, CA that started in the last quarter of 2014 is continuing. There are several different types of VA refinances and different reason for each type of refinance.

Different Types of VA Refinance Loans

  • VA IRRRL – also known as the VA Interest Rate Reduction Refinance Loan, or VA Streamline Refinance. This program is strictly for someone who already has a VA loan and is looking to lower their interest rate and payment. The VA loan program has been widely utilized in Orange County over the past few years as a great way to buy a home with no down payment. With a drop in interest rates many VA borrowers are finding that the VA IRRRL program is an easy way to lower their payment. Most lenders do not require an appraisal for this program. There is no income documentation, no termite inspection. It is a very “streamlined” program where most lenders can even use a lender credit to cover all closing costs and prepaid expenses. It doesn’t take much of a drop in interest rates for this program to be utilized.
  • VA Cash out Refinance – when a current VA borrower wishes to pull some equity out of their home then the IRRRL program is not an option. The loan is then a “cash out refinance”. A full appraisal is needed, along with a clear termite report. This is a fully qualifying loan. But for those who are planning to use the cash to consolidate other debts or improve their home a VA cash out refinance is a great option. VA allows the borrower to pull cash out up to 100% of the appraised value. VA is the only type of loan program that allows for 100% cash out financing, making this a very popular loan option.
  • Non VA to VA Refinance – You don’t have to have a VA loan to refinance into a VA loan. (you do for the IRRRL program, but not for a non-IRRRL). For someone with a Conventional or FHA loan who wants to either refinance to lower their rate and payment, or refinance to pull cash out for home improvements and debt consolidation, the VA program can be an excellent option. Conventional financing can get expensive when the loan to value is higher than 80%. For an Orange County homeowner with less than 20% equity who wants to avoid paying mortgage insurance, the VA program offers a great solution. VA does not have monthly mortgage insurance and tends to have very aggressive 30 year fixed interest rates. And of course, it is the only way to actually pull cash out up to 100% of the properties value. Plus, once in the VA loan you will be eligible for a VA IRRRL if rates go lower, which is the easiest way to lower your interest rate (for those who are eligible.)

Important Things to Know When Refinancing into a VA Loan

There are some things that are different about the VA program compared to other types of financing. For one, the borrower needs to be an eligible Veteran. The lender can help retrieve the Certificate of Eligibility from VA. Also, below are things to know about the VA program.

  • The VA loan limit in Orange County for 100% financing is $625,500 (2015 loan limit). This means it is possible to refinance a VA loan up to $625,500 at 100% loan to value. For those who already have a VA loan, they can take advantage of the VA IRRRL program even if their current VA loan is above that limit. The VA loan limit does vary from county to county, so its important to talk with an experienced VA loan specialist who can make sure you are calculating your loan amount correctly.
  • The VA Jumbo loan is a great option for loan amounts above the 100% loan limit of $625,500. Some lenders will fund VA loans as high as $1,500,000. Some equity is required when going above the 100% loan limit, but not much, especially when compared to other types of financing.
  • A clear termite report is required for non-IRRRL VA refinances. Section 1 items on the report will need to be signed off, and quite often Section 2 items will also need to be cleared.
  • The VA Funding Fee for IRRRL’s is .5% of the loan amount (unless the Veteran has a disability waiver). The VA Funding Fee for non-IRRRL refinances will range from 2.15% to 3.3%, depending on whether the VA borrower has used their VA eligibility for a VA loan previously. The Certificate of Eligibility from VA will determine what the Funding Fee percentage will be. In some cases the lender may be able to offer an option where a lender credit can offset the VA Funding Fee.
  • It can take less than 30 days to close a VA refinance, provided the VA borrower quickly forwards the requested loan documentation to the lender.

The first step in determining whether it makes sense to refinance into a VA loan or take advantage of the VA IRRRL program is to talk with a local Orange County VA loan specialist. The VA loan officer should be able to provide several custom VA loan scenarios, along with a Video explanation of the loan options. Working with a lender who makes sure you are making an educated decision based on your long and short term financial goals is extremely important, since your home will be one of the biggest financial purchases you will make.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com. I prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

100% Cashout Refinance VA Loan

va cashout refiThe VA home loan is one of the very few, if not only, loan programs that allows for 100% financing. But what many Orange County Veterans eligible for a VA loan don’t realize is that it also allows for refinancing to 100% loan to value. And even better, it is possible to get “cash out” up to 100% loan to value, up to the local county loan limit. This means that in Orange County, if a Veteran owns a home that is worth the VA county loan limit of $679,650 (in 2018) then he can refinance up to that loan amount. And the loan being paid off does not need to be a VA loan.

Why Would Someone Want to Refinance to 100% Loan to Value?

Refinancing is not for everyone. And pulling equity out can be dangerous, depending on the purpose of the refinance and the strength of borrowers qualifications. But there are plenty of reasons why this is a viable option for some.

  • Home Improvements – It’s not easy to get a construction loan these days. And even if you can get a construction loan it will typically come with restrictions on disbursements to contractors, high costs, etc. With VA, if there is any equity at all you can access it and without restrictions on its use.
  • Debt consolidation. For those home owners who have debts that are holding them back, being able to refinance and consolidate those debts into one loan can suddenly free up cash flow. For those looking to consolidate debt, a smart plan would be to look at using some of the monthly savings to accelerate the principal pay down on the new mortgage after building up a solid emergency reserve account.
  • College expenses. Kids grow up fast. And college is more expensive than ever. Using built up home equity is just another way to help pay tuition without dealing with student loans. Mortgage rates do tend to be lower than student loan rates.
  • Investments. For some, it may make sense to pull equity out for other investments. Hopefully, safe investments.

What to Consider when Refinancing

There are several important considerations when refinancing.

  • How long do you plan to remain in the home and/or loan? With any refinance you want to make sure you “break even” before you are out of the home or loan. Many times a VA refinance can be closed with the lender covering closing costs with a “lender credit”. However, unless you are a disabled Veteran qualifying for a Funding Fee waiver, then expect a full Funding Fee of 3.3% to be tacked onto the back end of the loan. If your plan is to sell the home soon, then a VA cashout refinance may not make sense.
  • What is your current interest rate and how much cash are you trying to pull out? Depending on current rates, it may or may not make sense to get a new 1st mortgage. For example, someone who has a 30 year fixed rate of 3.25% may not want to give that rate up, especially if they really don’t need much cash. Maybe an equity line 2nd is a better option.

Find out if a VA Refinance is Right for You

The best way to find out if a 100% VA cashout refinance is right for you is to talk to a VA loan officer who should be able to provide custom loan scenarios with details on the new loan amount, payment, closing costs (and any lender credit to offset closing costs), and amount of cash out. The loan officer should also be able to provide a Side by Side Analysis of your current loan to the new VA loan and other possible refinance solutions.

Authored by Tim Storm, a California VA Mortgage Loan Officer MLO 223456 – Please contact my office at the Home Point Financial NMLS #7706. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

Refinance FHA Loan into VA Home Loan

Many times Veterans will use an FHA loan to buy a home when the better option would have been a VA home loan. This happens in Orange County quite often. The reason tends to be because there a lot of lenders in Orange County who don’t understand the VA home loan program and think it is a difficult program close. And of course, that is not true.  This is also why a Veteran looking to use VA financing in Orange County should track down an experienced VA lender in Orange County. Getting back to the point of this article, what happens when a VA eligible home buyer uses FHA financing to buy a home? Well, probably the first option to consider is to refinance FHA loan into VA home loan.

Advantages of a VA Home Loan over an FHA Home Loan

  • VA will allow financing up to 100% of the property value. So while the 3.5% down payment is already a part of the equity in the home, refinancing into a VA loan almost immediately shouldn’t be an issue, at least not based on property value.
  • VA does not have monthly mortgage insurance like FHA does. The current monthly mortgage insurance factor used by FHA is 1.35% of the loan amount divided by 12. In Orange County, where a $500,000 loan is fairly common, the monthly mortgage insurance would be approximately $562. ($500,000 * .0135 / 12 = $562). That is over $6,500 per year. A VA loan will not have this monthly payment. Also, for FHA loan closed after June 3, 2013, the monthly mortgage insurance NEVER goes away. Ouch.
  • VA is actually easier to qualify for than FHA when it comes to debt to income ratios (lower payment with no mortgage insurance helps) and credit. For those who have had a previous foreclosure or short sale, VA only requires a 2 year wait period where as FHA requires three years.
  • Once in a VA loan, the Veteran will be able to take advantage of the Interest Rate Reduction Refinance Loan, or IRRRL, which is also known as a VA Streamline Refinance. There is no appraisal and no income documentation.

refinance an fha loan into va home loanThe Process of Refinancing From FHA to a VA Home Loan

Refinancing from an FHA loan to a VA home loan is a “full documentation” loan. The lender will require a review of two years tax returns and W2’s, paystubs for the most recent one month, a credit report, and full appraisal. It is also important to note that a clear termite inspection report will be needed prior to closing. Also, similar to the FHA Upfront Mortgage Insurance Premium, which is financed into the FHA loan, VA has a Funding Fee which is financed into the loan. For Veteran who have never used their VA before the VA Funding Fee will be between 2.15% and 2.4%, depending on the Veterans eligibility. However, Veterans who received some sort of disability pay from the Veterans Administration will most likely get their Funding Fee waived. The lender will be able to submit the VA Form 26-1880, Request for Certificate of Eligibility, which will spell out whether or not there will be a Funding Fee.

Before filling out a loan application and paying for the appraisal, the Orange County Veteran should consult with an Orange County VA loan officer who can prepare a custom Side by Side Analysis showing the potential benefits and/or costs of the refinance.  Because of the high FHA mortgage insurance, a refinance will quite often make sense for the Veteran. But a refinance doesn’t make sense every time. The borrower should check what the break even time period for the refinance is, and take into account how long they plan to remain in the home. A thorough analysis prepared by a trusted lender should give the Veteran the numbers they need to make an educated decision.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com