Home Refinancing for Military Veterans

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VA Mortgage Refinancing: What you need to know

If you are currently struggling to pay your monthly bills because your home mortgage is beyond your capacity to pay, you have one good option – refinancing. You should not wait until the bank sends you a foreclosure notice before acting.

Many homeowners are scared to refinance their home loans, knowing the daunting task involved in getting one. Home loans are guaranteed by either the Federal Housing Administration or by the Veterans Administration. But if you serve or have served in the military, you could make the refinancing of your home loan a lot easier. It’s a benefit you earned by serving.

What is typically a long and tedious process could be made easier if you are going to make use of the VA Home Loan, which could help you refinance your current mortgage and leave you with enough money for your bills and other expenses.

This service is available to veterans and active military men and women who are looking for ways to improve their finances through a more realistic and affordable home loans.

If you have been missing your monthly mortgage amortizations, it is very likely your credit has suffered. You don’t need to have an excellent credit rating to make use of the VA mortgage refinancing option. Even if your credit is bad, you can still refinance and negotiate the interest rates of the loan more which would be more to your liking.

VA Mortgage Refinancing: What you need to know

VA Mortgage Refinancing: What you need to know?

A VA loan is a lot different from the regular housing loan because it has very low interest rates and a big down payment is not required. A VA loan can be granted even to those people with a history of foreclosures.

The aim of the VA loan is to ease the sufferings of military veterans and active service members who are struggling with their mortgage and other bills, a common experience among military veterans who are still trying to settle into civilian life after their discharge from service.

It is the best option for military veterans and active service members and their spouses because of the low-credit requirements and easy general requirements.

Before taking the plunge right away, military veterans who are struggling with their mortgages must first review the requirements for a VA loan or refinancing and determine if they have a good chance of qualifying. Seeking help from a realtor who has extensive experience dealing with military veterans is a good idea.

The realtor can help you understand if you are qualified for mortgage refinancing and the things you need to prepare should you decide to apply. Knowing beforehand if you will qualify or not will save you time and effort, which will otherwise be wasted should you apply outright and be denied.

The realtor who is experienced handling military veterans’ home loans can help you figure out which type of loan you will qualify for, the best type of loan to suit your needs and your current financial position, and the duration of the loan you will need.

Advantages of VA Loans

VA loans are designed to provide military veterans and active service members with affordable home purchase or mortgage refinancing. If you qualify for a VA loan, it will give you the following advantages:

  • Qualification is easy for those who have veteran status, with lower credit score requirements.
  • VA loans allow higher debt-to-income ratio, which may be up to 41%. Conventional loans allow only up to 36% debt-to-income ratio, which could be problematic for military veterans who are still struggling to settle down into civilian life.
  • The loan does not require Private Mortgage Insurance (PMI), which is generally required for home loans guaranteed by the Federal Housing Administration (FHA).
  • Military veterans can take a loan for the total value of the property, up to 100% of the value. Regular housing loans allow only loans of up to 80% of the home value.
  • There are no pre-payment penalties. If your finances suddenly improve and you want to pay your loan early, VA loans do not charge penalties, unlike some conventional loans that will penalize you for paying off your loan early.

VA loans are recommended for military veterans and active service members who are first-time homebuyers and do not have enough money for a down payment, or those who already own homes but are struggling to pay the mortgage and their other financial obligations.  A lot of military veterans qualify for a VA loan without knowing it. It is, after all, a built-in benefit for the service rendered the nation.

Qualifications for a VA loan or Refinancing

The following military veterans may qualify for a VA home loan or refinancing:

  • Veterans of World War II who served from September 16, 1940 to July 25, 1947
  • Veterans of the Korean War who served from June 27, 1950 to January 31, 1955
  • Veterans of the Vietnam War who served from August 5, 1964 to May 7, 1975
  • Veterans of the Persian Gulf War who served from August 2, 1990 to the present

Military veterans who served during wartime must have served at least 90 days of active duty and must not have been dishonorably discharged. A military veteran who was discharged from the service due to disability may qualify for a VA loan even with less than 90 days of active service.

Military veterans who served in the military during peacetime may qualify for VA loan if they serve from March 27, 1947 to May 26, 1950; from February 1, 1955 to August 4, 1964; and from May 8, 1975 to August 1, 1990.

Military veterans who served during peacetime must have served 181 consecutive days of active duty. The military veteran must not have a dishonorable discharge on his record to qualify for a VA loan. A military veteran who was discharged due to disability with less than 181-day requirement may qualify for a VA loan.

Advantages of VA Loans

Refinancing with a VA Loan

The VA Home Loan provides qualified military veteran homeowners with options to lower their mortgage rates and decrease their monthly mortgage payments. In addition, military veteran homeowners can get cash back when they refinance their mortgage under the VA Loan, which they can use for paying off other financial obligations or making home improvements.

There are two main programs military veteran homeowners can take advantage of under the VA Loan refinancing:

  • VA Streamline or IRRRL Refinancing – The Interest Rate Reduction Refinance Loan, known as the VA Streamline Refinance, is the best option for military veteran homeowners who currently have VA loans and who aim to refinance to lower their monthly mortgage rate. Refinancing is easy, and may be completed quickly, because homeowners will be refinancing one VA loan product to another. This refinancing option does not require appraisal (in most cases), and the applicants need not secure another Certificate of Eligibility. This refinancing option charges little to no out-of-pocket costs. The best way to avoid out-of-pocket costs for the refinancing of the loan is to roll the closing costs and other fees into the loan balance. This type of refinancing does not allow the applicant to get any cash back. Homeowners must certify they currently, or have previously, occupied the property being refinanced.
  • Cash-Out Refinancing – This VA Loan refinancing option gives qualified military veteran homeowners the opportunity to lower the mortgage rate of their VA loan or conventional loan and extract cash from the home’s equity at the same time. The Cash-Out Refinancing has two main advantages: the military veteran homeowner can reduce their monthly mortgage payments because of the reduction of the mortgage interest rate, and the opportunity to turn the home equity into cash which can be used to pay off other loans or to be spent for home improvements. The Cash-Out Refinancing is different from a home equity loan, which is in effect a second loan that is added to the regular home loan. Instead of adding another loan into your existing loan, the Cash-Out Refinance loan will replace the current mortgage but with the same result of extracting the home equity into cash. This refinancing option is a good one for veteran homeowners who are looking to lower their interest rate and get additional spending money, without having to secure another loan parallel to the home loan. Be warned though military veterans who will be refinancing conventional loans or other mortgage programs cannot take any cash out.

The mortgage interest rates today are at one of the lowest levels in many years. If homeowners can further reduce their mortgage interest rate even by one-half of one percent, they can potentially save thousands of dollars over the life of the loan.

A half of a percent interest reduction for a $150,000 loan can generate up to $19,033.75 over a 30-year period of the loan. A one percent reduction of interest rate for a $450,000 home loan could save the borrower up to $98,089.43 over a thirty year period.

A homeowner who will refinance his home at 3.25% interest rate will have to pay only $435.00 a month for every $100,000 of loan. Nothing can be easier than that type of mortgage payment.