VA Loans – Is it Time to Refinance?

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There are a couple of reasons to consider refinancing. You may need additional cash right now in order to pay for a real need, such as paying college tuition or even remodeling your home, or buying a car (if you pay cash because of a ‘cash out’ refinance loan your mortgage interest is tax deductible…for now) or you may want to take advantage of the much lower interest rates that are available now. The VA has options for both of the above reasons.The first option is a VA Loan for Home Equity Refinancing. This refinance transaction requires repayment of your current mortgage directly from the proceeds of your new VA mortgage. This will be for the same borrower for the same property as on the original loan. A home-owner can refinance up to 90% of the appraised value, plus all closing costs, provided the property can stand up to the designated loan to value ratio. You do not have to own your home for any minimum amount of time, but your home has to have sufficient equity to quality for the loan. Equity is the difference between the market value of your home and the amount you actually owe on it, which includes both your first and second mortgages. You can use the extra money (the equity) to pay off high credit card debt, buy a car, remodel or whatever you need the additional cash for.The second option is a VA Streamline Refinance, sometimes referred to as an Interest Rate Reduction Loan. The sole purpose of this loan is to gain a lower interest rate in order to save money, not only on your monthly mortgage payment, but ultimately over the life of the loan. This program was created by the VA to make this happen with little or no out-of-pocket expenses for the home owner. Either the lender can pay the associated costs in exchange for a slightly higher interest rate or you can roll the closing costs into the new loan. The basics of this program are as follows:
This is only available to veterans who are refinancing their original VA mortgage and who have utilized their original eligibility for their current loan.
No assumptions are allowed
The homeowner cannot receive any cash back from the transaction.
All other liens must be subordinate to the VA’s lien.The VA will not require an appraisal, income or employment verifications, a credit report or a current termite report. The first qualifying criteria is that the current mortgage must have been paid as agreed for the prior 12 months and must not be in arrears at the time of the refinancing.As of July 15, 2010, the VA National Average Interest Rate was 4.617% APR for a 30-year fixed mortgage and 4.704% APR for a 15-year fixed mortgage. If you are currently paying at least half a point more in interest, this may be a viable option that can save you significantly, both on your monthly living expenses and over the life of the VA loan. You can also buy down the loan interest rate by paying points, which could make this an even more lucrative option.To get started, either contact your current lender, or another lender of your choice. This could easily be one of the smartest decisions you will make and the VA has made it so much easier for those eligible persons than what a non-veteran faces with the current economy. What are you waiting for?

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