Due to an ongoing rise in veteran suicide rates, interest costs on VA refinance loans are set to increase. For this reason, borrowers need to be aware of all options available to them. Here are several suggestions created by a California-based credit counseling service to help those with bad credit or no credit history refinance their VA loans.
Because the federal government lends VA real estate loans, lenders often have the opportunity of offering competitive interest rates to qualifying veterans and military personnel. Eligible veterans and active-duty service members often find that interest rates on a VA loan are typically much lower than an equivalent commercial mortgage. However, the Department of Veterans Affairs (VA) does not set interest rates on their loans. Therefore, borrowers must obtain the rates offered by a third-party lender who will charge higher interest due to the significant risk inherent in the transactions.
Before applying for a VA loan refinance eligibility, borrowers should know the exact appraisal value of their home so they can ensure they qualify for the lowest possible rate. Many third-party lenders do not require borrowers to submit appraisal estimates, but they are still required to provide documentation proving their homes are worth the asking price. Borrowers should obtain their most recent appraisal estimate and provide it to the lender when applying for a VA refinance eligibility. They should also inquire about any offers the lender may make for reducing the principal balance on the loan. This could result in the remaining balance being refinanced at a reduced rate.
If the current mortgage is close to being paid off, homeowners may also consider selling the house to obtain the largest cash outlay. If the cash proceeds obtained from the sale of the property would pay off the outstanding balance on the existing loan, then the homeowner may not be required to obtain a new mortgage. Many homeowners prefer to sell the house and purchase a new one since refinancing is often more expensive. However, they must make sure that they will be able to pay for a new mortgage in addition to paying off the cash they receive from selling the existing house.
If cash is available, some homeowners choose to refinance even if they have a low credit score. To get a better rate, borrowers can seek out lenders who specialize in offering VA loan rates to veterans. These lenders often charge significantly lower rates than other lenders. However, there are some disadvantages to refinancing using a lender who specializes in helping veterans finance their loans. These lenders may require up to 15% down payment, require additional paperwork, charge higher fees, and may not provide tax benefits.
Many homeowners may not be aware that they can obtain lower interest rates through self-employed mortgages. Many self-employed individuals are eligible for reduced interest rates through the Home Affordable Program (HAP). However, self-employed homeowners may pay more interest for their VA loans than those with traditional mortgages. Veterans who use a self-employed mortgage refinancing plan should consult with their VA representative to learn more about the advantages and disadvantages of this option. Borrowers should also research all the options they have available before choosing the option that is best for them