I Need a VA Refinance Now!
When homeowners call to inquire about refinancing their current home mortgage loan, over the course of the initial conversation the actual reason they are seeking a refinance is generally revealed.
It may not be as simple as just going to a lower interest rate.
The reasons that compel a homeowner to refinance their current mortgage fall into several categories.
The basic requirement for homeowners seeking to refinance is that the interest rate on the refinanced loan must be lower than their present interest rate.
VA Eligibility: In this category, the homeowner realizes that they are eligible for a VA Loan.
Their current loan probably has PMI (private mortgage insurance) because when their current loan was obtained, they had less than 20 percent loan to value and were required by the lender to carry insurance.
With a VA loan, the government guarantees the loan eliminating the need for PMI and therefore reducing the payment.
80/20 Mortgage and Second Mortgage: To avoid PMI (private mortgage insurance) some lenders have structured the original loan amount so that there are two loans, one for 80% of the purchase price and the other for 20% of the purchase price.
Normally the 20% loan is a higher interest rate.
When interest rates drop, many homeowners who qualify for a VA Mortgage Loan will refinance so that they can combine the two loans and have a lower interest rate over all.
Cash Out: When a homeowner finds themselves in need of cash to pay off: maxed out credit cards with a high interest rate; medical bills; college tuition; a once a life time trip; etc, they often consider a VA refinance.
To get this type of loan, the appraisal on the property has to be enough to cover the present mortgage balance and the amount of cash needed.
Need to Skip One or Two Mortgage Payments: Some homeowners find themselves in a serious financial problem and the amount of money they could save by not paying one or two mortgage payments would help them get in a more stable financial position and are willing to pay the closing costs associated with a VA refi in order to get the new loan.
They need to understand that they are not actually skipping payments they are deferring payments.
What actually happens is that generally the new loan closes before the next payment is due on the present loan and the payment is not due on the new loan until four weeks after closing.
In effect they do not have to pay two payments and have that money to use for other pressing needs.
Need the Escrow Refund: When a refinance occurs and the current loan is paid off, any amount left in that escrow account is refunded to the homeowner and a new escrow account is set up with the new loan.
The amount refunded varies from nothing to a few thousand dollars.
Need a Lower Monthly Payment: When interest rates are lower, many veterans call a lender to see what amount they can save on their mortgage payment if they refinance.
A lower interest rate results in a lower monthly payment.
Want to Pay off Home in fewer Years: When interest rates go down, there is a good possibility that a homeowner can refinance a 30 year loan to 25 or fewer years and still have the same monthly payment.
Some of the above reasons make more sense than others.
It is the job of the loan officer to answer questions, give quotes for any scenario the homeowner wants to consider; guide them away from decisions that may not be advisable in the long run and make sure they fully understand the pros and cons of refinancing.
However, at the end of the day, the homeowner is the one who really understands their financial situation and will have to make the decision to say, "I need a VA refinance NOW!"
It may not be as simple as just going to a lower interest rate.
The reasons that compel a homeowner to refinance their current mortgage fall into several categories.
The basic requirement for homeowners seeking to refinance is that the interest rate on the refinanced loan must be lower than their present interest rate.
VA Eligibility: In this category, the homeowner realizes that they are eligible for a VA Loan.
Their current loan probably has PMI (private mortgage insurance) because when their current loan was obtained, they had less than 20 percent loan to value and were required by the lender to carry insurance.
With a VA loan, the government guarantees the loan eliminating the need for PMI and therefore reducing the payment.
80/20 Mortgage and Second Mortgage: To avoid PMI (private mortgage insurance) some lenders have structured the original loan amount so that there are two loans, one for 80% of the purchase price and the other for 20% of the purchase price.
Normally the 20% loan is a higher interest rate.
When interest rates drop, many homeowners who qualify for a VA Mortgage Loan will refinance so that they can combine the two loans and have a lower interest rate over all.
Cash Out: When a homeowner finds themselves in need of cash to pay off: maxed out credit cards with a high interest rate; medical bills; college tuition; a once a life time trip; etc, they often consider a VA refinance.
To get this type of loan, the appraisal on the property has to be enough to cover the present mortgage balance and the amount of cash needed.
Need to Skip One or Two Mortgage Payments: Some homeowners find themselves in a serious financial problem and the amount of money they could save by not paying one or two mortgage payments would help them get in a more stable financial position and are willing to pay the closing costs associated with a VA refi in order to get the new loan.
They need to understand that they are not actually skipping payments they are deferring payments.
What actually happens is that generally the new loan closes before the next payment is due on the present loan and the payment is not due on the new loan until four weeks after closing.
In effect they do not have to pay two payments and have that money to use for other pressing needs.
Need the Escrow Refund: When a refinance occurs and the current loan is paid off, any amount left in that escrow account is refunded to the homeowner and a new escrow account is set up with the new loan.
The amount refunded varies from nothing to a few thousand dollars.
Need a Lower Monthly Payment: When interest rates are lower, many veterans call a lender to see what amount they can save on their mortgage payment if they refinance.
A lower interest rate results in a lower monthly payment.
Want to Pay off Home in fewer Years: When interest rates go down, there is a good possibility that a homeowner can refinance a 30 year loan to 25 or fewer years and still have the same monthly payment.
Some of the above reasons make more sense than others.
It is the job of the loan officer to answer questions, give quotes for any scenario the homeowner wants to consider; guide them away from decisions that may not be advisable in the long run and make sure they fully understand the pros and cons of refinancing.
However, at the end of the day, the homeowner is the one who really understands their financial situation and will have to make the decision to say, "I need a VA refinance NOW!"
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