Are you considering a VA cash-out refinance? With interest rates lower than ever, now may be the perfect time for veterans to take advantage of this type of loan.
But before taking the plunge and committing to a new mortgage, there are some important questions that should be asked in order for homeowners to make sure they’re getting the best deal possible.
Let’s look at five key questions you should ask when looking into VA cash-out refinancing so you can rest assured that you’re making smart financial decisions. Let’s jump in.
Deciding which loan is the best for your particular situation can be overwhelming with so many different options available. VA cash-out refinance loans have certain advantages and drawbacks that could make them more ideal for some than others.
On the plus side, VA cash-out refinance loans are a popular product for those that qualify because they offer options to borrow up to 100 percent of the home value—something other refinancing options don’t always offer. This can open up more opportunities for homeowners if they need access to extra cash.
Another plus is that it’s possible to transfer a non-VA loan into a VA-backed loan. This can offer many advantages, including rolling closing costs into the value of the loan and lowering your upfront costs.
However, bear in mind that refinancing with any type of loan comes with closing costs.
As a homeowner, be sure to use a tool, such as a mortgage calculator, to ensure you can afford the new monthly payments and the closing costs for the refinance before committing to a new loan.
VA cash-out refinance loans can offer some great benefits, but you need to make sure that the amount of equity in your home meets your lender’s qualifications.
Generally speaking, you should have at least 25-30%* equity in your home before you can qualify for a VA cash-out refinance loan. Anything less than that, and you may face difficulty obtaining pre-approval, as lenders will be wary of providing such a high-risk loan without adequate security.
Working with your individual lender will be the best way to ensure you meet the criteria for approval on a new loan.
In general, you will have to meet their credit score requirements along with debt-to-income (DTI) ratio requirements. In addition, the home that you’re refinancing must also be your primary residence.
Having long-term financial goals is essential for good financial health. Do you need to pay off a large debt such as student loans? Do you have home renovations planned to increase the value of your home? Do you want to take advantage of low-interest rates?
All of these questions should be considered when opting for a refinance. A cash-out refinance can help you accomplish your goals by putting more money in your pocket. However, before making the decision to refinance, your goals should be clear and a refinance should be the answer to helping you reach those goals, not a decision made on a whim.
Financing a home can be an intimidating process, especially one that may have added costs and fees to consider.
A VA cash-out refinance does involve some of these extra expenses, such as origination fee, appraisal fee, and closing costs, in addition to the principal and interest payments.
Before you decide to go through with a cash-out refinance loan from your VA lender, make sure to read up on all the associated costs so that you understand exactly what you’ll be paying for and can budget accordingly.
Being aware of the additional costs upfront will help prevent any unpleasant surprises down the road.
Refinancing a loan is a great way to potentially save money on your monthly payments or access funds for home renovations and other expenses.
If you’re looking for competitive rates and terms on your VA cash-out refinance loan, the best place to start is by speaking with an experienced lender familiar with VA loans.
Ask them the right questions so you can get a full understanding of what they offer and ensure they meet all of your needs.
It’s a good idea to compare multiple lenders before making a decision as well. While it might take some leg work, this extra step can help you find the very best deal and the most experienced lender.
The VA cash-out refinance loan can provide a great opportunity for homeowners to get better rates and terms on their mortgages compared to other refinancing options.
While there are pros and cons to consider, homeowners should assess the value of a VA cash-out with their short-term and long-term financial goals in mind. Additionally, homeowners should account for any upfront fees and costs associated with a VA cash-out refinance loan.
Ultimately, the decision between getting a VA cash-out refinance loan versus other available refinancing options comes down to individual circumstances and preferences. But if you’re a qualifying veteran, VA loan products can provide an excellent benefit as a thank you for your service.
Learn more about VA loans with The Federal Savings Bank. We’re a veteran-owned lender that understands the questions you have and the decisions you have to make. The spirit of dedicated service is in everything we do.
Apply for your VA home loan perk today. Home begins here.
Subject to credit approval. Terms and conditions may apply. Subject to VA eligibility requirements. Property insurance is required on all loans secured by property.