Refinancing a Home in California Using a VA Loan
Recently, California Veterans have been capitalizing on low-interest rates by refinancing their existing VA, FHA, or conventional mortgages into new VA loans. The VA program offers several distinct advantages and options compared to other loan types available in California, making it an attractive choice for many.
VA to VA Refinance | The IRRRL
The Interest Rate Reduction Refinance Loan (IRRRL) is designed for holders of existing VA or CalVet loans paying interest rates higher than the current market rates. This program simplifies refinancing as it does not require income verification.
There is no appraisal. This is a “Streamlined” refinance. The current home value is not considered in the loan approval.
Veterans could potentially save significantly over their loan's duration through this program, but it's crucial to evaluate if the refinancing offer is beneficial. Lenders often cover closing costs using a Yield Spread Premium (YSP), but there is also a 0.5% Funding Fee added to the loan that veterans should consider in their break-even calculations. Veterans with a service-connected disability rating will not have a VA Funding Fee.
Additionally, lenders may offer the option to "defer" payments, meaning the interest for those months is added to the loan balance, increasing the total interest paid over time. We provide a detailed VA IRRRL Analysis for our client to review.
Refinancing into a VA Loan from FHA or Conventional Loans for California Veterans
The trend of converting FHA or conventional loans into VA loans is growing, particularly in California's high-cost regions, such as Orange County, San Francisco, Marin, Almeda, and Los Angeles. Veterans with Jumbo or High Balance Conventional loans, often with little equity, have struggled to capitalize on low-interest rate refinancing options. For instance, a veteran in Orange County with a 7% fixed-rate $800,000 loan on a home valued at just $900,000 faces significant barriers to conventional refinancing, including required PMI or high FICO-related interest rate adjustments. The restrictions are even tighter for those wanting to consolidate first and second mortgages, as High Balance Conforming guidelines are more stringent than VA loan policies, which allow for up to 90% loan-to-value refinancing without a fixed loan limit. (and even 100% cash out refinancing is possible) Additionally, any move from a non-VA to a VA loan is considered a "cash-out" refinance by the VA, even if no actual cash is returned to the borrower. It is crucial for those affected to consult with a California VA loan expert when considering these options.
Cash Back Options in VA Refinancing for California Veterans
In California, VA loans permit veterans to receive cashback up to 90% of their property’s value during a refinancing. (ask us about 100% cash-out options) This flexibility is significant for those needing over 80% of their property value, allowing them to benefit from a low 30-year fixed rate without mortgage insurance and possibly consolidate higher-interest debts. California VA Expert lenders will provide customized loan scenarios and detailed comparisons to help veterans understand their refinancing options thoroughly.