For those VA eligible homeowners in Orange County, the VA Cashout refinance program has several advantages over a Conventional (Fannie Mae or Freddie Mac) cash out refinance. Being eligible for a VA loan is required of course, but even if a VA eligible does not currently have a VA loan, they should seriously consider choosing VA for their cashout refinance.
Although VA underwriting guidelines technically will allow cash out up 100% of the properties value, finding a lender who will allow it can be difficult. The VA actually considers any refinance that is not an Interest Rate Reduction Refinance Loan (IRRRL), which is a VA to VA streamlined refinance, to be a cash out refinance. This means that even a VA eligible borrower refinancing a Conventional loan to a VA loan with no cash out would be considered, or underwritten, as a cash out refinance. Most VA lenders will allow a cash out refinance to 90% of the properties value, but there are a few lenders who will allow a refinance up to 100% of the properties value, but won’t allow cash going back to the borrower. Your best bet is to talk with an experienced California VA Loan Officer who can review your situation and offer several options.
This an another factor that can vary from lender to lender. The VA does not actually have a minimum FICO score requirement. But most lenders do. Currently, most lenders require a minimum FICO score of at least 620 for a cash out refinance. FHA also does not have a minimum score, leaving lenders to impose their own minimums. Fannie Mae and Freddie Mac have been increasing their minimum FICO scores. As of the latest changes by Fannie Mae, to get a cashout refinance through Fannie Mae, the minimum FICO score is 680 if the loan to value is above 75%. If your FICO score is below 680, then you’ll end up with big pricing “add on’s” which results in higher interest rates. These pricing “hits” make it difficult to get an accurate Orange County mortgage rate quote without a loan officer reviewing your properties value and your FICO score. VA loans do not have these same risk based pricing hits, meaning your interest rate will not dramatically increase just because your FICO score is not perfect.
While Conventional loan guidelines will not even allow a cashout refinance over 80% loan to value, FHA will. But FHA has Monthly Mortgage Insurance. While this is a small price to pay in exchange for the ability to pull cash out up to 85% loan to value, VA does not have Monthly Mortgage Insurance, even at 90% to 100% loan to value. For those who are eligible for VA financing, this is a huge advantage. Also, the VA loan limits for Orange County are very high.
The most important thing to do before starting the process of a refinance is to research all of your items. Contact an experienced Orange County VA loan officer who can prepare loan scenarios based on your goals and qualification.
Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan. 877-786-4243 x 7.
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