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 a California Veteran wants to take advantages of low interest rates or increased property values? Then it’s time to look at options outside of the CalVet home loan program.
*Updated May 1, 2021
Reasons for Refinancing from CalVet to VA
- Interest rates drop. If interest rates improve to something lower than what a CalVet borrower currently has then a good option is to look at options for refinancing to a VA loan. There are many CalVet loans with interest rates above 3.5%.(As of this update on May 1, 2021) VA mortgage interest rates, which follow the market and have been very low over the past few years, 2020 and 2021, is an option that could save a Veteran quite a bit of money. A cashout refinance into a VA loan can be done up to an appraised value of 90%. A VA IRRRL can go to 100% of the value, although since there is no appraisal on a VA IRRRL it doesn’t really matter what the appraised value would be.
- Pull equity out for home improvements or debt consolidation. 2020 and 2021 has seen great price appreciation in real estate in California. For the first time in years, homeowners 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 90% of the property’s value. Some lenders who offer VA financing but don’t specialize in it may not know how to refinance a CalVet loan. But keep looking, because there are California VA lenders who know how to handle a CalVet to VA refinance.
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-backed home loan. Since CalVet is not actually a VA loan but is backed by VA in most cases, it is possible to refinance using the VA IRRRL program. But the lender needs to know how to deal with how CalVet holds ownership of the property and the fact that CalVet does not use a Mortgage Note. another reason to contact a California Va Loan Specialist.
The Process of Refinancing into a VA Home Loan
Refinancing for cashout 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 pay stubs 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 it’s 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. – My direct line is 949-829-1846. 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.