I need a VA refinance now!

When homeowners call to inquire about refinancing their current home loan, over the course of the initial conversation, the real reason they are seeking a refinance is usually revealed. It may not be as simple as going for a lower interest rate. The reasons that compel a homeowner to refinance their current mortgage fall into several categories. The basic requirement for homeowners looking to refinance is that the interest rate on the refinanced loan must be lower than its current 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 of the loan value and the lender required them to have insurance. With a VA loan, the government guarantees the loan by eliminating the need for PMI and thereby 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. Typically, the 20% loan is a higher interest rate. When interest rates drop, many homeowners who qualify for a VA Home Loan will refinance in order to combine the two loans for an overall lower interest rate.

Cash withdrawal: When a homeowner needs cash to pay: maxed out credit cards with a high interest rate; medical bills; University tuition; a journey of a lifetime; etc, often consider a VA refinance. To obtain this type of loan, the property’s appraisal must be sufficient to cover the current mortgage balance and the amount of cash required.

You need to skip one or two mortgage payments: Some homeowners are in serious financial trouble and the amount of money they could save if they miss one or two mortgage payments would help them get into a more stable financial position and are willing to pay the closing costs associated with a VA refinance. to get the new loan. They need to understand that they are not actually skipping payments, they are putting them off. What actually happens is that the new loan is typically closed before the next payment on the current loan is due, and the payment on the new loan is not due until four weeks after closing. In effect, they do not have to pay two payments and have that money to use for other urgent needs.

Need Escrow Refund: When a refinance occurs and the current loan is canceled, any amount left in that escrow account is refunded to the owner and a new escrow account is established with the new loan. The amount refunded varies from nothing to a few thousand dollars.

You need a lower monthly payment: When interest rates are lower, many veterans call a lender to see how much they can save on their mortgage payment if they refinance. A lower interest rate results in a lower monthly payment.

You want to pay for your home in fewer years: When interest rates drop, there is a good chance that a homeowner could refinance a 30-year loan to 25 years or less and still have the same monthly payment.

Some of the above reasons make more sense than others. The loan officer’s job is to answer questions, give quotes for whatever 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!”