Were The Va Home Loan Experts
Its hard to believe, but Nutter Home Loans made its first VA Home Loan in 1951. For over 65 years, weve been the VA Home Loan experts. Our founder, James B. Nutter, Sr., was a U.S. Army Veteran and over the years weve helped thousands of Veterans and active duty soldiers take advantage of the VA Streamline Refinance Program. Were known for offering the best VA Loan rates and closing cost options. But more importantly, we understand that our country owes a huge debt to our nations finest. It would be our privilege to serve you. Learn more about our VA Home Loans.
What You Need To Know To Apply For A Va Home Loan
The benefits of VA loans are hard to surpass. These government-backed loans have no down payments, no private mortgage insurance, and low interest rates. You are eligible for a VA loan if you are an active-duty member, veteran, National Guard member, or a surviving spouse of a service member. Continue reading to learn how to apply for a VA home loan.
Schedule Your Closing And Pay Your Fees
A few steps need to happen between application and closing. For example, if you’re doing a cash-out refinancing, your lender will almost certainly order an appraisal. So, the final step is to follow all of your lender’s closing procedures, schedule a closing date, and pay whatever closing costs your loan requires. With VA loans, this likely includes the VA funding fee and some other closing costs .
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How Much Equity Do I Need To Refinance A Conventional Loan
Conventional wisdom says you’ll need 20 percent to refinance with a conventional loan, but in fact, you’ll only need 20 percent if you want to avoid mortgage insurance or plan to do a cash-out refinance.
With mortgage insurance, you can refinance with as little as 5 percent equity, says David Krichmar, mortgage banker at CORE Lending in Conroe, Texas.
If you’re pulling cash out, “you pretty much have to be at 80 percent loan-to-value,” Velez says.
If you have very little equity or you’re underwater, and if your loan is owned or backed by Fannie Mae or Freddie Mac, you might be able to refinance with a streamline refinance program. Fannie Mae’s program is called their “High Loan-to-Value Refinance Option” Freddie Mac calls their version “Enhanced Relief Refinance Mortgage”. Both have similar structures and restrictions, and are for borrowers with loan-to-value ratios of 97.01% and up.
“If it’s a rate-and-term refinance and the existing loan is owned by Fannie Mae or Freddie Mac, you can still do the higher loan-to-value,” Velez says.
Benefits Of The Va Irrrl
The VA IRRRL program has a lot potential of benefits for current VA loan holders.
- Low VA streamline refinance rates
- Lower credit scores are okay
- No appraisal needed
- Low, or possibly no, out-of-pocket closing costs
- A lower VA funding fee than most VA loans
- No bank statements or proof of funds needed
- No income or employment verification required
Youre unlikely to find this combination of benefits with a conventional mortgage refinance or even with a cash-out refinance through the VA.
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How To Use A Va Loan For Rental Property
Theres one big problem when it comes to using a VA loan to buy a rental or investment property: you cant technically do it since VA loans are only available for primary residences. Despite this, homeowners can refinance the VA loan on their current home into a conventional loan, freeing up their VA credit, rent that home out for income, and then buy a new home with a VA loan that they will use as their primary residence. This requires you to give up living in your current home, which may or may not be acceptable , but might be a smart financial solution for many. Also, remember that PMI premiums , will make the mortgage on your first home more expensive, and that could easily eat into your profits.
Remember, VA loans are available for homes with up to 4 living units, so, if youre really serious about getting more rental income, so it might make sense to choose an affordable duplex or triplex as a new primary residence. Or, if you want to skip the entire refinancing process, it might simply be smarter to sell your old home to free up your VA credit, and to purchase a multiplex with your new VA loan.
What Are The Benefits Of A Va
Unlike an IRRRL, you can use this program if you dont already have a VA-backed mortgage as long as you meet the eligibility criteria. A benefit of a VA-backed loan, as opposed to a conventional refinance, is that you dont have to pay for expensive mortgage insurance.
With a cash-out refinance, you also have the freedom to use the cash from your homes equity for whatever your needs are. You could, for example, help fund college tuition or a home renovation or consolidate other debt. This is a risky move, though, because if youre unable to make payments, you could default on your home and lose it.
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Who Is Eligible For A Va Loan
VA loan eligibility is based on your length of service, your duty status, and the character of your service. Current service members generally must have 90 continuous days of service to be eligible for a Certificate of Eligibility . Former military members must have served for at least 24 continuous months or a certain number of days of active duty.
Top 5 Bankrate Va Refinance Lenders
- JFQ Lending Best broker
- First Mortgage Direct Best online lender
- United Wholesale Mortgage Best non-bank lender
Bankrate helps thousands of borrowers find mortgage and refinance lenders every day. To determine the top mortgage lenders, we analyzed proprietary data across more than 150 lenders to assess which on our platform received the most inquiries within a three-month period. We then assigned superlatives based on factors such as fees, products offered, convenience and other criteria. These top lenders are updated regularly.
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Va Streamline Refinance Eligibility Guidelines
If youre interested in a VA Streamline Refinance you must currently have a VA home loan. Most veterans, including National Guard and Reservists, can qualify.
There are some additional eligibility requirements related to your type and length of military service.
In addition to those minimum service requirements, youll need to meet the following criteria to be eligible for a VA Streamline Refinance loan:
- Payment history: Youll need a six-month history of on-time payments
- Waiting period: The IRRRL program requires a 210-day waiting period since you closed your existing loan
- Most VA lenders will not check your credit score
- Net tangible benefit: Your new loan has to do something your old loan couldnt do for example, reducing your interest rate and monthly mortgage payment or switching from an adjustable-rate mortgage to a fixed-rate mortgage
Some of these requirements arent as simple as they seem on the surface, so lets take a closer look at each one.
Whats The Maximum Size For A Va Cash
The Blue Water Navy Vietnam Veterans Act of 2019 removed loan limits for VA loans. As of January 1, 2020, the Department of Veterans Affairs no longer sets loan limit maximums.
Instead, your mortgage lender will limit the size of your loan based on your credit history and debt-to-income ratio as well as your income stability just like it would with a conventional loan.
For an in-depth look at VA loan limits, see our VA loan limits page.
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No Private Mortgage Insurance Requirements
On a typical loan, a buyer who makes a down payment less than 20% would likely need to purchase mortgage insurance. Private mortgage insurance, or PMI, protects the lenders stake in the property but is paid for by the borrower. The premiums for this coverage are folded into your monthly mortgage payments, adding to an already hefty repayment plan.
Since VA mortgages are backed by the U.S. government and have no down payment required, PMI is not necessary, giving eligible applicants yet another opportunity to save on their homebuying journey.
How To Get A Va Loan
Eligible veterans and active-duty personnel can apply for a VA loan through any VA home loan lender. These are regular banks and other mortgage lenders that have been approved to handle VA loans.
The first step in applying for a VA loan is to complete a Request for Certificate of Eligibility, VA Form 26-1880, available from VA-authorized lenders. With many VA home loan lenders, you can obtain and submit your request online. You will need to provide proof of your military service or other eligible status. Once you receive your certificate, you can apply for the mortgage with any VA-authorized lender.
When applying for a VA loan, you want to shop around to be sure to find the best VA loan lenders. Check with at least three and perhaps more, and compare both VA loan rates and closing costs to see who has the best deal. Shopping for online can make it easier to compare multiple lenders and find the best one.You can use the form at the top of the page to get personalized quotes from lenders tailored to you and the VA loan you are seeking.
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Enter Your Military Status To Get The Most Accurate Results Possible
The fifth section of the calculator contains multiple important variables for veterans. Namely it lists VA status, loan use & if the funding fee is financed in the loan. By default these are set to active duty/retired military, first time use & funding fee financed.
If you are a reservist or a member of the guard, please change this variable to reflect your funding fee.
First or Subsequent Use
If this is an additional use rather than first time use then reset that field to reflect the higher funding fee for subsequent uses.
Roll Funding Fee Into Loan
If you do not want to finance the funding fee, then set the financing option to No.
Injured in Service
If you were 10% or more disabled while in service, your funding fee can be waived. Set “finance the funding fee” to No and deduct that number from your cash due at closing to get your actual closing costs.
Va Funding Fees Vs Conventional Loan Pmi
In less than three years, a borrower putting down 0% on a VA loan will come out ahead by paying a VA funding fee compared to paying PMI on a conventional mortgage. If you put down 3% on a conventional loan, it will take about eight years to reach the 20% equity youll need to ask your lender to cancel PMI. If your home goes up in value, you may be able to cancel PMI sooner.
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Va Table Of Recommended Residual Monthly Income By Region
Family size over 5: Add $80 for each additional member up to a family of seven.
Service members who fall short of residual income standards can often shift to a smaller loan amount for a good shot at VA loan approval.
Benefits Of A Va Streamline Refinance
The VA IRRRL program exists to help VA loan holders lower their interest rates, or save money in other ways, without having to go through a complex and costly refi.
The programs benefits include:
- Locking in a lower mortgage rate
- Getting lower monthly payments
- Avoiding the credit check and appraisal
- Saving on closing costs compared to other refi programs
- Extending a loans term up to 10 years to lower payments
- Accessing up to $6,000 to make energy efficient home improvements
- A quick turnaround time compared to many other loans
- A chance to shorten the loan term which can save money long-term
- No ongoing private mortgage insurance like conventional loans
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How Are Va Loan Rates Determined
Mortgage rates can fluctuate often, and the rate that one borrower is eligible for may not be available to someone else.
There are several external factors that affect mortgage rates, including the current state of the economy and actions taken by the Federal Reserve. During certain times including throughout the pandemic the Federal Reserve cuts interest rates to stimulate economic growth. When this happens, mortgage rates often go down.
There are also internal factors that affect a borrowers interest rate. One of the most important factors is a borrowers . Generally, borrowers with credit scores above 740 are eligible for the best rates. Other personal factors that affect your mortgage rate include your debt-to-income ratio and the size of your down payment.
While VA loans dont require a down payment, borrowers may qualify for a lower rate if they do choose to put down money upfront. Additionally, while VA loans usually require a DTI of 41% or less, borrowers with lower DTIs may be eligible for the best rates.
Finally, the loan term you choose will impact your VA loan. In general, 15-year loans tend to offer lower interest rates than 30-year loans.
The Va Loan Guaranty Explained
The amount veterans can borrow without a down payment is based on the VA Loan Guaranty, which is the key to how VA home loans work. The VA doesn’t actually make loans for veterans itself, but instead guarantees part of the loan amount on approved mortgages issued by authorized lenders. This typically is 25 percent of the purchase price, up to the limits described above. So if a VA borrower defaults on a $400,000 mortgage, the VA will pay the insurer up to $100,000 to cover losses not recovered through foreclosure.
For the lender, the VA’s guaranty is like having a 25 percent down payment as a hedge against default. So the VA borrower gets all the benefits of a hefty down payment low interest rate, easier qualifying, no recurring fees for private mortgage insurance without having to put out the cash. Of course, he or she is still responsible for paying off 100 percent of the loan.
If you don’t borrow the maximum you’re allowed without a down payment, you’ll still have some of your VA Loan Guaranty remaining, which you could apply toward buying a second or vacation home. The formula for figuring how much of your guaranty you have left is fairly complicated though, as it depends on the lending limits for the county where you bought your first home and the one where you plan to buy a second. A VA lender can help you with this calculation.
More information: The VA Entitlement explained
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Va Streamline Refinance Vs Va Cash
There are two VA refinance loans the VA Streamline Refinance and the VA Cash-out Refinance.
Like the name suggests, with the VA cash-out loan you can take cash out using your home equity.
The VA cash-out requires a lot more documentation because it could increase your loan balance significantly. Youll need a Certificate of Eligibility, for example, to show your level of entitlement for the higher loan amount.
The cash-out refis higher loan amount generates your cash back which you could use on home improvements, debt consolidation, or even to make a down payment on another real estate property.
Another difference is that the VA cash-out refinance can be used to switch from a non-VA loan into a VA loan.
For instance, if you currently have an FHA loan or conventional loan, but youre VA-eligible, you could use the VA cash-out refi to refinance into a VA mortgage with or without cash back at closing. The VA Streamline, on the other hand, requires the original mortgage to be a VA loan.
In addition, the VA Streamline Refinance does not allow you to get cash back except for up to $6,000 for energy efficient home improvements such as new windows, insulation, or a modern HVAC system.
The streamline refinance is faster, easier to get, and simpler.
Am I Eligible For An Irrrl
You may be eligible for an IRRRL if you meet all of the requirements listed below.
All of these must be true. You:
- Already have a VA-backed home loan, and
- Are using the IRRRL to refinance your existing VA-backed home loan, and
- Can certify that you currently live in or used to live in the home covered by the loan
Note: If you have a second mortgage on the home, the holder must agree to make your new VA-backed loan the first mortgage.
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What Are The Advantages Of A Streamline
You cant get cash back with IRRRL, loan with Streamline refinances your current VA loans with another home loan but with lower interest rates along with these Streamline VA Refinance Pros:
- You can switch from Adjustable Rate Mortgage to Fixed Rate Mortgage
- Better refinance rates or loan rates
- Lower monthly payment
- Primary residence, investment or second home OK
Can I Skip A Mortgage Payment By Getting A Va Streamline
No, payments cannot be skipped. Depending on the closing date of the new loan, it may appear that a payment was missed. In reality, the previous or subsequent months interest was wrapped into the new loan. Sometimes, lenders falsely market this as a skipped payment however, the VA does not condone this practice.
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