Why would someone want to refinance a CalVet home loan into a standard VA home loan? Well, there are a few reasons, the first being that it’s not possible to refinance CalVet to CalVet, since state and federal laws prevent the CalVet program from being anything other than a purchase program. But what happens when the California Veteran wants to take advantages of low interest rate or increased property values? Then it’s time to look at options outside of the CalVet home loan program.
Reasons for Refinancing from CalVet to VA
- Interest rates drop. If interest rates improve to something lower than what a CalVet borrower currently then a good option is to look at options for refinancing to a VA loan. There are many CalVet loans with interest rates above 5%. VA interest rates, which follow the market and have been very low over the past few years, is an option that could save a Veteran quite a bit of money. A refinance into a VA loan can be done up to a loan to value of 100%.
- Pull equity out for home improvements or debt consolidation. 2018 has seen great price appreciation in real estate in California. For the first time in years home owners can use their equity to finance the home improvements they have wanted since they bought their home. It is possible to pull cash out on a VA home loan refinance up to 100% of the properties value. Some lenders will cap this out at 90%. If you need 100% then keep looking, because there are California VA lenders who will allow cashout refinancing to 100%.
What about the VA IRRRL?
The VA home loan program has a great refinance option called the Interest Rate Reduction Refinance Loan, or IRRRL for short. The IRRRL is a program specifically for current VA home loan borrowers that allows them to quickly and easily refinance to take advantage of lower interest rates. While not all lenders follow VA underwriting guidelines to the letter, there are some California lenders that do. The VA IRRRL does not require an appraisal. There is no income documentation required, making it a very easy program to close, both for the lender and the borrower. Also, most lenders can close an IRRRL by using a lender credit to cover some or all of the closing costs, making this program one of the best refinance options available, as long as you currently have a VA home loan. So although a current CalVet borrower can’t take advantage of the IRRRL program, once they refinance into a VA loan they will be able to quickly take advantage of further interest rate drops quite easily.
The Process of Refinancing into a VA Home Loan
Refinancing into a VA home loan is a “full income and credit” qualifying loan. Two years tax returns and W2’s or 1099’s are required, along with paystubs and bank statements. Also, a clear termite report will be needed prior to funding. A VA appraisal is needed and the loan amount cannot be higher than 100% of the property value.
Find out if a CalVet Refinance Makes Sense
The first step in determining whether a CalVet refinance makes sense is to contact a California Veterans home loans specialist who can prepare custom loan scenarios with a breakdown of the new loan amount, payment, and closing costs. A refinance does not always make sense for everybody, so its important to talk to someone who will discuss the pro’s and con’s of a refinance.
Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.