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What Are Va Loan Equity Reserves

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Home Equity Line Of Credit

VA Home Loans for Active Duty & Reserves in 2020

A home equity line of credit works well when you need flexibility. It is:

  • Not set in stone borrow, repay, and borrow again up to your credit limit, much like you would with a credit card
  • Inexpensive to set up similar to a HEL and usually cheaper than a refinance
  • More fluid You pay interest only on your monthly balance instead of the full credit line. Most HELOCs have a variable interest rate

Refinance A Highltv Mortgage Into A Lower Rate

The housing downturn happened over 10 years ago, but many veteran homeowners are still feeling the effects.

Thousands of homeowners nationwide are underwater on their mortgages, meaning they owe more than the home is worth.

The good news for veterans, anyway is that the VA cashout refinance can be opened for up to 100 percent of the homes value. The VA program can refinance a loan to a lower rate even if the homeowner is nearly underwater.

For instance, say a veteran received a nonVA loan for $200,000 at an interest rate of 6.5%.

Home values dropped, and they were unable to refinance into a conventional loan.

As an eligible veteran, they could open a VA cashout loan for 100 percent of the homes current value, paying off the highinterest loan, and reducing their monthly payment.

Can Existing Va Borrowers Lower Their Interest Rates By Refinancing A Va Loan

On top of that, its also possible to reduce your interest rate by refinancing a VA loan through the interest rate reduction refinance loan . This loan requires you to use additional VA financing to replace your current loan and comes with an upfront VA funding fee of 0.50% of the loan amount.

In the end, the VA loan program can be a big help to those who have sacrificed their country and want to achieve the dream of homeownership.

Also Check: When Can You Refinance An Fha Loan

Can You Use A Va Loan For A Rental Property

The Department of Veterans Affairs allows VA homebuyers to purchase multi-unit properties with the intention of using one of the units as their primary residence.

So, yes, it is possible to use your VA loan for rental property, bearing one of the units is your primary residence.

However, a VA mortgage cannot be used to buy property or land solely as an investment or rental property.

How Many Units Can I Buy With My Va Loan

What Is Equity Reserves

Potential homebuyers can buy up to a fourplex with their VA loan by occupying one unit and renting the additional three.

Our LenderVeterans United Home Loans is a VA approved lender Mortgage Research Center, LLC NMLS #1907 . Not affiliated with the Dept. of Veterans Affairs or any government agency. Not available in NV. 1400 Veterans United Dr., Columbia, MO 65203. Equal Housing Lender

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What Are Va Entitlements And Why Are They So Important

A key feature of VA loans is the entitlement. A VA loan entitlement is basically the amount of the loan that the VA will guarantee to the lender if you default.

There are two types of entitlement:

  • Basic entitlement: up to $36,000 for loans worth less than $144,000, or 25 percent for loans of that amount or more.
  • Bonus entitlement: Up 25 percent of the Federal Housing Finance Agency loan limit, minus the basic entitlement.

For those who need to purchase a home that costs more than $144,000, the bonus entitlement can be used. For example, in most counties in the U.S., the FHFA conforming loan limit in 2021 is $548,250 and $647,200 in 2022. In that case, 25 percent of the loan amount would be $137,062.50 in 2021 or $161,800 in 2022. However, for the total entitlement, you need to subtract out the basic entitlement, leaving you with $101,062.50 in bonus entitlement money for 2021 and $125,800 in 2022.

Many lenders are willing to loan those who qualify for a VA loan up to four times the amount of their entitlement, so you might be able to get a loan for $144,000 on the basic entitlement of $36,000.

For those who live in high-cost areas, the bonus entitlement is figured in the same way, but based on the higher FHFA conforming loan limit, which is based on the county where the house is located. Before applying, check the FHFA website for more information on the loan limits in your area.

Am I Eligible For A Va

You may be eligible for this type of loan if you meet all of the requirements listed below.

All of these must be true. You:

  • Qualify for a VA-backed home loan Certificate of Eligibility, and
  • Meet VAsand your lendersstandards for credit, income, and any other requirements, and
  • Will live in the home youre refinancing with the loan

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What Are Va Loan Points

Buying a VA loan point also known as a discount point or just a point means youre paying cash up front to lower the interest rate on your new home loan.

A VA loan point typically costs 1% of your loan amount. As a result, the cost of a point varies by the size of your home loan. One point on a $200,000 VA loan is $2,000 and two points equals $4,000. On a $250,000 loan, a single point would cost $2,500 while two points would cost $5,000.

Lenders use the term discount point because buying points discounts the interest rate on a veterans home loan.

I Got A Report Of Available Funds Letter What Does It Mean

See How Veterans Get Cash Out of Their Home Equity

Some mortgage lenders try to solicit new refinance business by sending officiallooking letters to homeowners. These come in a few different forms.

You might have received a letter titled something like:

  • Report of available funds
  • Understanding your available funds report
  • Or, You qualify for a mortgage insurance premium reduction

A letter may list your name, address, and a numerical amount of available funds. These letters may even show your approximate account balance, which they use to estimate the amount of funds you could cash out.

These letters could also look like an important notice from the federal government. A couple of years ago this pretty convincing letter was going around, but it didnt actually come from the Department of the Treasury.

Similar letters may look like they came from the IRS, a bank, or other financial institution.

Such a letter most likelywill not come from your current lender.

These letters are marketing pieces designed to entice a homeowner into refinancing their home, explains Grant Moon, CEO of Home Captain.

They generally list a potential amount of money the available funds listed that you could get in a cashout refinance. And they can be eyeopening, especially if your propertys value has appreciated and that available funds number is high.

Actually, Moon adds, that enticing available/accessible funds sum may be exaggerated.

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Va Cashout Refinance Rates Vs Standard Va Rates

One thing to keep in mind is that cashout interest rates tend to be a little higher than nocashout mortgage rates.

That means cashout refinance rates might be around 0.125% to 0.25% higher than VA loan rates you see advertised online.

However, this rule is not set in stone. Your own refinance rate depends on factors like your credit score and home equity so if your personal finances are in a good place, you might get a great cashout refinance deal.

And remember, you dont have to refinance with your current mortgage lender. Use this to your advantage.

You can shop around with multiple VAapproved lenders to see which one can offer the lowest cashout refinance rates for you.

Transition Assistance Advisor Program

The Transition Assistance Advisor program is a partnership between the National Guard and VA to assist Veterans. The TAA Program, housed within the National Guard Office of Warrior Support, places an NG/VA trained expert at the NG Headquarters in each of the 50states as well as PR, GU, VI, and the District of Columbia. The advisor serves as an advocate for Guard members and their families, as well as other geographically dispersed military members and families.

In collaboration with state and local coalition partners, the TAA Program provides VA benefit enrollment assistance, referrals, and assists in facilitating access for Veterans through the overwhelming maze of programs, with the compassion of someone who knows what it is like to transition from the Guard to active duty and then back to civilian status.

Advisors receive annual training from VA experts in VA health care and benefits to assist Guard members and their families with access to VA health care facilities and TRICARE facilities within their network. To find a local Transition Assistance Advisor call 1-877-577- 6691 or go to www.taapmo.com.

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Can You Take Out A Home Equity Loan With An Outstanding Va Mortgage

Yes, you can take out a home equity loan if you have an outstanding VA mortgage. The VA does not guarantee home equity loans or HELOCs, so your VA entitlement will not come into play here. Your eligibility for a home equity loan will depend on how much equity you have, your credit score, and various other financial factors.

Do I Really Have A Lot Of Home Equity

Bay Equity Home Loans

The accessible funds or available funds numbers you see in this type of letter are an estimate of the equity built up in your home. Theoretically, this equity could be cashedout by refinancing.

Home equity is normally calculated by subtracting what you owe on your home loan from the propertys fair market value.

However, The numbers you see on these letters are usually fake or teaser numbers meant to give you the impression there is a big pot of money waiting for you if you respond, notes Ailion.

In fact, without talking directly to a lender, you cant know exactly how much equity you are eligible to cash out, adds Moon.

The amount of money you can withdraw from your home equity depends on your loan balance, your credit score, and what type of mortgage you qualify for, among other factors.

A lender can only tell you how much equity youre able to cash out after you fill out an application and the lender takes a look at your finances.

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Best Uses For A Va Cashout Refinance

Cashback isnt the only reason to open a VA cashout loan. In fact, the name for this loan is a bit misleading.

The VA cashout can pay off and refinance any loan type, even if the applicant does not plan to receive cash at closing.

The veteran can:

  • Pay off a nonVA loan
  • Get cash at closing, or
  • Do both simultaneously
  • The VA IRRRL, by comparison, is a VAtoVA loan program only. You cannot use the IRRRL program if your current loan is FHA or any other type.

    Va Rental Property Requirements

    Multi-unit properties must meet unique requirements that differ from single-family homes. The VA lenders guide states that every living unit must have:

    • Independent utility services OR
    • Individual shut-offs for each unit

    For buyers looking to purchase a condo with their VA loan, you must check to see if the property is already on the VA approved condo list. If it isnt, you must apply for it to be added. This list does not apply to buyers looking at purchasing duplexes.

    While each lender may have different requirements when it comes to purchasing rental and investment properties with a VA loan, the hard work and longer approval process could pay off in a huge financial win for you and your family.

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    Hud Reserve Requirements And Guidelines On Fha Loans

    This ARTICLE On HUD Reserve Requirements And Guidelines On FHA Loans Was PUBLISHED On June 30th, 2020

    Although HUD Reserve Requirements require reserves in certain cases, homeowners should have reserves voluntarily.

    • Homeowners are responsible for their own repairs and maintenance, unlike renters
    • Renters can always contact their landlord in the event if something is not working
    • Certain repairs such as a breakdown on the HVAC systems, electric, plumbing can cost hundreds if not thousands of dollars
    • Appliances do break down
    • Appliance repair can cost a lot of money
    • In many instances, when an appliance breaks down, it is cheaper to replace them than trying to fix it
    • A refrigerator can run three to five thousand dollars
    • Many homeowners who live in the cold midwest may have a breakdown of their heating system during cold winters
    • Most contractors want payment when the service call has been completed
    • It is highly recommended homeowners have reserves for a rainy day
    • There are instances where lenders will require reserves
    • Reserves cannot be gifted
    • You cannot use sellers concessionsand/or lender creditfor reserves

    In this ARTICLE, we will discuss and cover HUD Reserve Requirements And Guidelines On FHA Loans.

    What Is A Va Home Equity Line Of Credit

    VA Home Loan – US Veteran, Active, Reserve, Military Spouse, PROS/CONS – How VA Loans Work

    A home equity line of credit is another way to access your equity. With this option, a portion of your equity becomes a credit line, which you can withdraw from as needed over a certain period of time. It functions similarly to a credit card.

    With most HELOCs, youll pay only interest for the first 10 years or so. At that point, your withdrawal period will end, and youll begin making larger monthly payments in addition to your existing mortgage payments until the loan is paid off.

    As with home equity loans, the VA does not guarantee HELOCs. Eligibility will depend on your credit score, equity stake, and other financial factors.

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    What Are Reserves

    One month reserves mean the borrower needs to have one month of principal, interest, property taxes, insurance, and if applicable, homeowners association dues.

    • Reserves cannot be gifted
    • Sellers concessions and/or lender credit cannot be used for reserves
    • Reserves need to be the borrowers own funds
    • Also, if you are purchasing a three to four-unit multi-family home, HUD requires borrowers to have three months of reserves
    • So in the case of manual underwriting and/or buying a three to four-unit multi-family property, the borrowers need to come up with the down payment, closing costs, and reserves
    • The down payment and closing costs can be gifted
    • Closing costs can be covered by sellers concessions
    • Sellers concessions cannot be used for the down payment and only for the closing costs
    • Not all loan programs have the same reserve requirements
    • Many lenders who have lender overlays may require additional reserves even though they may not be HUD guidelines

    Gustan Cho Associateshas no lender overlays on government and conventional loans.

    See the chart below on the reserve requirements on other government loans and conventional mortgages:

    There are instances where a mortgage underwriter can condition reserves on a borrower with less than perfect credit. There are other instances where an approve/eligible per AUS borrower can get downgraded to a manual underwrite. Therefore, one months reserves are required on manual underwrites.

    Can I Have A Co

    Yes. Sometimes it helps to use both your credit and your co-borrowers credit and income to help you qualify for the maximum required loan amount. Keep in mind that if your co-borrower isnt a spouse or another veteran, the guarantee only applies to the veterans stake roughly half of the loan. This means that the VA guarantee will only be around 12.5% of the loan instead of the usual 25%. For this reason, lenders may be more hesitant to offer joint VA loans. Rocket MortgageĀ® only offers VA joint loans on VA Streamlines.

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    Can I Use A Va Loan To Buy A Rental Property

    No, but you can use a VA loan to refinance an existing rental home you once occupied as a primary home. The VAs Interest Rate Reduction Refinance Loan , also known as the VA Streamline Refinance, can be used to refinance an existing VA loan for a home where you currently live or where you used to live, but no longer do.

    Additionally, its possible to make rental income from a property of up to 4 units as long as you live in one of the units

    What Is A Va Cash

    How To Get Your Certificate of Eligibility for a VA Loan

    A cash-out refinance is often the best way to leverage your home equity. This allows you to both replace your existing VA loan , while also turning your equity into cash.

    The VA guarantees cash-out refinances, and using one can often lower your interest rate in the process. Even better? It leaves you just one single monthly payment . To learn more, see our VA cash-out refinance guide now.

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    What Is A Va Home Equity Loan

    Home equity loans allow you to turn your equity into a single lump-sum payment. They function much like your existing VA mortgage and require monthly payments over an extended period of time. These payments are made in addition to your current mortgage payment .

    Unfortunately, there is no specific VA home equity loan. The VA only guarantees primary mortgages, not second mortgages which home equity loans are considered. For this reason, you wont need a COE or proof of military service to apply for one. Qualifying requirements will depend on your lender, equity amount, and more.

    Who Is Eligible For A Va Loan

    As a rule of thumb, almost all active duty or honorably discharged service members are eligible for a VA loan.

    You may be eligible for a VA loan if any one of these statements describes you:

    • I served 181 days during peacetime.
    • I served 90 days during wartime.
    • I served 6 years in the Reserves or National Guard.
    • I am the spouse of service member who was killed in the line of duty.
    • I currently receive disability payments from the VA.

    What is the VA Funding Fee and is it required?

    Yes, it is required. It is a fee paid directly to the Department of Veteran’s Affairs so that they can guarantee your loan and provide you with the opportunity to receive a loan with little to no money out of pocket.

    How much is the VA Funding Fee?

    It depends on several factors including: Whether you are Active Duty, Retired, Guard or Reserve and whether you this is a first time use, subsequent use, or a cash-out refinance as well as how much of a down payment you are putting down. The fee can range from as little as 1.25% up to 3.3% of the loan. Generally, the more money you put down the lower the VA funding fee. Please contact us and we will help you to determine how what the exact cost of the VA Funding Fee would be for your particular situation.

    Do I have to pay the VA Funding Fee out of pocket?

    No, you can include the VA Funding Fee in your loan and pay the funding fee over the course of your loan.

    Do I still have to pay other normal closing costs like Appraisal, Title and Escrows?

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