I need a VA refinance now!

When homeowners call to inquire about refinancing their current home loan, the real reason they’re seeking refinancing is often revealed during the course of the initial conversation. 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 their current interest rate.

VA Eligibility: In this category, the homeowner finds that they are eligible for a VA loan. Your current loan probably has PMI (private mortgage insurance) because when your current loan was taken out, they had less than 20 percent of the loan value and the lender required them to take out insurance. With a VA loan, the government guarantees the loan eliminating the need for PMI and therefore lowering 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 go down, many homeowners who qualify for a VA Home Loan will refinance so they can combine the two loans and have a lower interest rate overall.

Cash withdrawal: When a homeowner finds himself in need of cash to pay: maxed out credit cards with high interest rates; medical bills; University tuition; a once-in-a-lifetime trip; 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 needed.

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

Need Escrow Refund: When a refinance occurs and the current loan is paid off, any amount remaining in that escrow account is returned to the owner and a new escrow account is established with the new loan. The amount reimbursed 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 by refinancing. A lower interest rate results in a lower monthly payment.

Want to Liquidate Housing in Fewer Years: When interest rates drop, there’s a good chance a homeowner can 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. It’s the loan officer’s job to answer questions, give quotes for whatever scenario the homeowner wants to consider; Guide them from making 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 truly understands his financial situation and will have to make the decision to say, “I need a GO refinance NOW!”