VA Refinancing Options For Eligible Homeowners

March 14, 2011 | by Andrew Vierra | VA Mortgage

Refinancing a California VA Loan has never been easier. People refinance for many reasons—lower rate, consolidate debt, take cash for a purchase, take cash for college. The reasons are as endless as the individual.

Two basic California VA Refinance options are:
◾VA Streamline Refinance (Rate/Term Refinance): In VA verbiage, this is the Interest Rate Reduction Refinance Loan (IRRRL). It allows a California VA borrower to easily lower their interest rate/payment. While the VA doesn’t require an appraisal, today’s lenders will require a conventional appraisal to determine that there is sufficient value to refinance the home. The new loan can usually be completed without cash needed at closing.

The California Veteran’s new loan can include:
◾The existing VA Loan
◾Allowable fees/charges
◾New pre-paid charges (setting up the new impound account)
◾Up to two discount points (to lower the rate further)
◾New VA Funding Fee (.5% of the loan amount unless the Veteran is exempt due to a service-related disability)

Eligibility (basic) for this loan requires
◾Current loan being refinanced is a VA loan
◾Loan must be current
◾New payment is lower than the current (refinancing from an ARM to a fixed rate is the exception)
◾No cash back at closing

◾Cash-Out Refinance: Any refinance into a California VA Loan that doesn’t meet the above criteria, automatically falls into this category—whether you take cash out or not. This loan option allows an Eligible California Veteran to refinance at:

95% loan-to-value, if:
◾Consolidating non-mortgage-related debt
◾Consolidating mortgage-related debt where one of the loans has had a balance added in the previous 12 months
◾Consolidating other debts
◾Converting from a Conventional or FHA Loan into a California VA loan

100% loan-to-value, if:
◾Converting from a Conventional or FHA Loan into a California VA loan
◾Consolidating mortgage-related debt that has not been added to in the previous 12 months

California VA Refinance Frequently Asked Questions:

Who determines the California VA IRRRL Rates or California VA Refinance Rates?

Just like conventional loans, the interest rates are determined by the mortgage markets. VA rates tend to be lower than Conventional or FHA due to the government insurance provided to lenders by the VA.

Do I need to find my Certificate of Eligibility (COE) again?

On an IRRRL, no. A California VA Loan Specialist gets the required information directly from the VA. On a Cash-Out, yes. Your California VA Loan Specialist can also get this (much quicker than applying yourself) directly from the VA. A DD214 will be required to request the COE.

Do I need to use my current VA Lender?

Actually, No. You only need to find a lender that’s approved to do VA loans. You definitely want to find someone that Specializes in VA Loans.

Do I really need an appraisal? I thought those weren’t required on IRRRLs.

By VA guidelines, appraisals aren’t required. But the VA allows lenders to set their own requirements so long as the loan “at least” fits the VA’s (remember, the VA doesn’t lend the money; they insure the lender against the event of borrower default on the loan). In today’s lending environment, the lenders want to ensure that there is sufficient equity in the home.

I want a “no closing cost” VA Loan and I don’t want the costs put into my loan. Can I do get that with the California VA Loan?

Yes. While the eligible Veteran or active-duty person is not allowed to pay many of the closing costs for the loan, those costs can be covered by the bank (same as with other loans you hear advertisements about). Just like other loans, you get a slightly higher interest rate than if you paid the costs yourself, and the bank pays for the closing costs on your behalf.