California VA Refinancing Options For Eligible Homeowners
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:
Any refinance into a California VA Loan—other than from another VA loan—the VA considers a “cash-out” refinance--whether you actually take cash out or not. As of this writing (10/14/14—subject to change) and our current guidelines*, to get a cash-out refinance, the home must have a lien of at least $1 (may not be owned “free and clear”).
This loan option allows an Eligible California Veteran to refinance a home loan at or below the VA County Loan Limit per the following:
100% loan-to-value1, if
- The borrower does not receive more than $500 cash back and/or consolidate non-mortgage debt.
- Consolidating mortgage-related debt that has not been added to in the previous 12 months.
- Second mortgage liens being paid off with the proceeds of the new first mortgage must be at least 12 months old and may not have had any draws totaling more than $1,000 in the previous 12 months unless the draws were for documented home improvements.
95% loan-to-value1, if
- The property is no more than 2 units.
- You want in excess of $500 money back at closing.
- Consolidating non-mortgage-related debt.
- Consolidating mortgage-related debt where one of the loans has had a balance added in the previous 12 months.
- Converting from a Conventional or FHA Loan into a California VA loan.
1Loan amounts above the VA County Loan Limit require more equity.
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 may 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-connected 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.
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 guaranty 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, you will need a COE. With proof-of-service (DD214, NGB 22 or 23, or Statement of Service for active-duty military) your California VA Loan Specialist can get this directly from the VA much quicker than if you did it yourself.
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 get that with the California VA Loan?
Yes. While there are fees considered in the a category called “non-allowable fees”, the eligible Veteran or active-duty person is allowed to pay up to 1% of the fees on their own behalf. Another option is allowing the costs to be covered by the bank (same as with conventional loans about which you hear or see advertisements). As with other loans, you get a slightly higher interest rate than if you paid the costs yourself, but this is typically the choice of most borrowers.
*Other restrictions/guidelines apply.