Change is the only thing that remains constant, in our daily lives and especially in the mortgage world.  2019 has brought several new changes already (and we’re only in the first two months of 2019!)  These changes apply towards VA Loans.  I’m sure this will be an ongoing learning experience for everyone, including lenders, it appears the VA has segmented their loans into two categories: (VA IRRRL REFINANCES ARE OMITTED)

VA Type 1:

This is the standard refinance, called a rate / term refinance.  It’s when a the interest rate or length of the mortgage are changed.  An example would be someone who refinanced from a 5% mortgage to a 4.5% mortgage, or someone that went from a 30 year mortgage to a 15 year mortgage.

VA Type 2:

This type of loan was referred to as a cash out refinance. It is when someone uses their VA loan to access the equity in their home, taking liquid money from it.  This will also covers consolidation loans when a veteran includes things like car payments, credit cards, and other debt into their existing mortgage.

 

Additional Forms

No one ever complains there aren’t enough forms to sign, the VA (notorious for bureaucracy) has added two forms.

  1. Net tangible Benefit Form – Assess the benefit to the veteran and must meet at least one of the following:
    1.  The new loan eliminates monthly mortgage insurance, whether public or private, or monthly guaranty insurance;
    2.  The term of the new loan is shorter than the term of the loan being refinanced;
    3. The interest rate on the new loan is lower than the interest rate on the loan being refinanced;
    4. The payment on the new loan is lower than the payment on the loan being refinanced; (v) The new loan results in an increase in the borrower’s monthly residual income;
    5. The new loan refinances an interim loan to construct, alter, or repair the home; (vii) The new loan amount is equal to or less than 90 percent of the reasonable value of the home, or;
    6. The new loan refinances an adjustable rate loan to a fixed rate loan.
     2. VA Cash-Out Comparison Form – Evaluates the previous loan to the new loan during a cash-out (Type 2) VA refinance.

                VA Cash-Out Comparison Certification (Initial) is to be provided based on the current loan information given by the vet.  We will                  also do a final one with the accurate information once verified.

 

 Refinance Restrictions:

Prior to these adjustments a veteran could take out or refinance their home up to 100% of the appraised value.  Meaning if your appraisal came in at $200,000, your new loan amount could be $200,000 plus the VA funding feeThe new changes indicate that the loan amount INCLUDING the VA funding fee must not exceed 100% of the appraised value.  Which means it reduces the amount of equity a veteran can access during their refinance.

 

Loan Seasoning

Currently a veteran may not refinance if the following hasn’t been met:

1) 210 days from the first monthly payment

2) 6 monthly payments must be made.

 

Conclusion

Changes are always being made with mortgages, restrictions and regulations are a daily aspect of our life.  If mortgages were easy I wouldn’t have a job after all.  But these changes will not be so devastating, it is a couple more forms and a little more precaution to assess an eligible loan.

 

Thank you,

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Justin Scott

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Executive Mortgage

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Green Bay WI 54301