Beware of unsolicited offers
Unfortunately, some seedy mortgage lenders are trying to make a profit
Urging homeowners to refinance – even if it's not in their best interests.
Seasoned homeowners are typically more likely to be hit by refinance frauds because the VA's mild loan guidelines make it easier for lenders to "churn" those loans and make money quickly.
The best thing you can do to avoid scammers is to be wary of unwanted refinancing offers. Mortgage offers that come out of the blue and seem too good to be true usually are.
If you want to refinance your home, do research on loan programs
and interest rates on your own and choose a reputable, transparent lender.
Review Your VA Loan Refiance Options With Top Lenders Jan 29, 2021.
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Signs of Fraud Refinancing VA Loans
There are some red flags that can expose a fraudulent or misleading VA
If you have been contacted by a mortgage company about refinancing,
The Consumer Financial Protection Bureau (CFPB) requests the following:
Low interest rates with no specific conditions
An offer with extremely low interest rates that is not clearly accompanied by
The terms of the loan are likely to be misleading.
A homeowner might refinance himself for that new interest rate just to be
surprised by higher than expected borrowing costs or unaffordable monthly payments.
There are a few ways that advertised interest rates can be misleading.
Surprise Mortgage Points. Purchase of mortgage points orDiscount pointsCan lower your interest rate significantly. However, each point costs 1% of the loan amount (or $ 1,000 for every $ 100,000 loaned). Some lenders advertise below market interest rates without stating that the borrower will have to pay a large fee upon completion in order to actually receive that interest rateVariable Rate Mortgage vs. Fixed Rate Mortgage. Adjustable Rate Mortgages (ARMs) Usually have lower interest rates than Fixed Rate Mortgages (FRMs). This can make an ARM look more attractive in advance. However, this low interest rate can change after the initial fixed interest period of 5, 7 or 10 years. This could allow the homeowner a much higher mortgage rate and a later payment. If you are expecting a fixed rate and payment, make sure the lender doesn't advertise an ARM rate15 year vs. 30 year mortgage. Similar, 15 year old FRMs typically have lower rates than 30-year FRMs. However, the monthly mortgage payments are much higher as the loan has to be paid back in half the time. Despite lower interest rates, 15-year mortgages are unaffordable for many borrowers
Any mortgage offer should contain the terms of the new home loan as well
as well as the interest rate. Search:
Annual Percentage (APR) Loan term (repayment period, often 15 or 30 years) Type of mortgage (ARM or FRM) Mortgage points included in the rate shown
Also, keep in mind that interest rates vary from borrower to borrower
An advertised tariff is unlikely to be exactly the same as the tariff that you were offering.
It depends on factors like your creditworthiness and your home.
Even if a refinancing offer looks perfectly legitimate, you have to do it
Apply to the company and get a customized price quote to see how good a business is
it can really offer you.
Get an Estimate of VA Refinance Rate (Jan 29, 2021)
Offers to skip mortgage payments
The Department of Veterans Affairs specifically prohibits lenders
Advertise that borrowers can skip a mortgage or two payments, though
Refinancing. A lender might list this as a benefit because it is not real
Advantages for your refinancing; or because it wants the offer to look better than
An offer that says you can skip mortgage payments when refinancing
should be avoided.
Offers to get cash from one
Most homeowners pay their property taxes and homeowner insurance in an escrow account. Your mortgage lender stores the payments in an escrow account before distributing them to the insurance company and tax authorities when they are due.
After refinancing, a homeowner can get an escrow refund if they had cash in their account at the time the new loan was taken out.
This is neither a unique benefit of, nor a reason for, a VA mortgage
You will also likely need the cash to fund a new escrow
Account on your new home loan.
Aggressive sales tactics
Borrowers should be extremely careful of lenders with aggressive selling tactics.
If a lender calls you multiple times via email, email, or phone call, it will
probably one reason why it is so eager to get you to refinance – because it will benefit from it
You. However, it is not necessarily good for you.
If you're on a federal or state calling list, remind lenders about it
that it is illegal to call or write to you without prior consent. Don't invoke laws
result in heavy fines for any lender who hurt them.
Make sure you do your due diligence before refinancing. It's relative
get mortgage quotes online or by phone from a lender quickly and easily
Have a look around to find out more about the terms and prices you really want
qualify for a VA refinance loan. Chances are the company is desperately looking for your business
won't be your best choice.
Free refinancing offers
Lenders could also tempt homeowners into refinancing by promoting a refinance with no closing costs or no out of pocket costs. These programs may not be what they seem.
Unlike some other types of loans, VA loans do not allow homeowners refinance to include closing costs in their loan balance. Only the VA financing fee can be included in the loan amount. The remainder of your refinancing completion costs are due up front.
It is possible that the lender will cover some or all of you
Closing costs. This is known as a "lender loan".
But it's not a free ride – in exchange for lender credit you will
Usually you pay a higher interest rate on your new loan. This could increase yours
Mortgage costs significant in the long run.
So if a lender does not announce any closing costs for a VA refinance, it will
This really means that you are adding to the cost of your loan by paying higher interest rates
for the rest of your mortgage term.
Two major VA refinance scams to watch out for
There are two main cases of VA loan refinancing fraud where both loans “churn”. In this case, lenders encourage those with VA loans to refinance when there is little or no benefit.
This is also known as “equity”
Stripping or skimming equity as the scammers may suck up the equity
from your home, unnoticed by you, because you are not paying anything out of pocket for yours
Churning is designed to fill the pockets of lenders at the expense of borrowers.
Fraud 1: The Disbursement Refinancing
When you run out of money, you may want to dive into some of the equity you've built up
up in your house. This process is known as payout refinancing.
For the right homeowner, VA payout refinancing can be a good idea. This allows you to unlock up to 100% of your home equity at a low interest rate.
Refinancing withdrawals is not for everyone. Your home equity is not free money –
and it is important to understand the implications of a withdrawal reference beforehand
means you are resetting the clock on your mortgage. When your 30 year mortgage is up
For example, if you have 25 years left, you start over with another 30 years
Refinancing is associated with acquisition costs. These often make up 2-5% of the loan
Amount that can easily add up to thousands of dollars out of pocket.
Remember, the VA funding fee is the only closing cost that can be funded.
Try to trick borrowers into repeatedly refinancing in this way. But that remains
Reset clock. And closing fees will continue to be paid to lenders. "
Bags. So the lender benefits at the expense of the borrower.
Refinancing withdrawals can be a good strategy. But you have to make the decision
alone or with a financial advisor; not based on a lender tempting you
with promises of unused home equity.
Fraud 2: The Bad Refinance
Generally it is a
Good idea to refinance yourself at a lower interest rate. Your monthly payments are
lower. And your total borrowing costs go down. What do i dislike
Well it depends on what you are
have to do to get this lower rate.
For example, let's say you have a $ 300,000 mortgage at 4.25% that you've been paying for five years. Your current balance is $ 266,170 and your principal and interest payment is $ 1,476.
Refinance allows you to lower your payment to $ 1,309 without changing the interest rate.
This is because you are extending the repayment of the remaining balance to a new term and extending your repayment by five years.
Becomes an unscrupulous lender
Refer to the difference of $ 167 per month as "Savings". But you are clearly saving
nothing – in fact, you pay more interest in the long run.
Most lenders don't just offer
However, refinance your old loan at the same interest rate. They offer a lower rate – and they could
even offer to extend the loan for you at no cost.
For example, you could
You get a mortgage rate of 3.75% at a price of three points (3% of
Your loan amount) plus other fees – possibly in full upfront
Cost of $ 10,000.
Your new payment will fall off
$ 1,476 to $ 1,279, saving you nearly $ 200 a month. But the
Total amount of actual remaining interest increases from $ 158,800 to
$ 185,300. So the "cheaper" refinancing loan will cost you an additional $ 26,500
Keep it for the full term of the loan.
What if you don't keep the full term of the loan? You can save month to month, but remember, the closing cost was $ 10,000. You must keep the loan for 50 months (over 4 years) to repay the money you spent on refinancing.
Is VA Streamline Refinance Legitimate?
VA Streamline Refinance (also known as Interest Rate Reduction Refinance Loan (IRRRL)) is a legitimate refinancing program supported by the US Department of Veterans Affairs.
The IRRRL program aims to
Make refinancing easier and more affordable for veterans and service members.
It has mild documentation requirements and no new home valuation.
But although it's a safe program
On its own, Streamline Refinance is sometimes the vehicle for VA mortgages
Amounted to. And you can see why.
The VA wanted to do
Refinancing from a VA loan to a new VA loan is cheap, easy and cheap
simple. It has made many bureaucratic procedures easier
is helpful for borrowers but may have made IRRRLs more prone to abuse.
Since these loans are easier to get
VA Streamline refis often approve and close faster than traditional refinancing
are more attractive to fraudulent lenders who intend to "churn" loans in order to: a
However, this does not mean that a VA Streamline refinance cannot make you a fantastic deal. They usually do. It just means that you have to choose your lender carefully.
As with any refinance loan, compare the IRRRL offers from multiple lenders to determine which can offer the best deal. And be careful when comparing tariffs – just because you can lower your tariff doesn't mean you will save money in the long run.
Compare the loan fees and total interest cost of your IRRRL quotes to make sure the loan is truly benefiting you.
Review Your VA Streamline Refinancing Options (Jan 29, 2021)
When is VA Loan Refinancing a Good Idea?
We have just described a number of ways a refinancing can have a negative impact
Effects on Homeowners. However, these warnings are not intended to deter you
Rather, these examples are intended to illustrate how important it is
Fully understand a refinancing offer before signing it. You should be aware of both
the short and long-term costs and be confident that the new loan will benefit you.
If done right, refinancing isn't just worth it – it can save you
huge amount of money. Refinancing can also help you access home equity
important expenses like home renovations, debt consolidation, or payments
The trick is to only refinance when the outcome meets your financial needs
Often this means refinancing for a sufficiently low interest rate
You save money on monthly mortgage payments and total interest costs.
However, this is not always the case.
When your income has been reduced and you need to save money each time
Monthly it can make sense to refinance a lower monthly payment, even if
Their long-term costs are slightly higher.
On the other hand, it might make sense to accept higher monthly amounts
Payments when your goal is to shorten your loan term and repay the house early.
Or maybe you want to cash out money. In this case, your new interest rate may not be particularly low. But that shouldn't be that important.
There are many different scenarios in which refinancing makes sense. Either way, however, it has to be a personal decision based on your current mortgage and long-term goals.
If you are not sure whether refinancing is a good decision, contact a
trusted financial advisor or contact a reputable mortgage lender who can run
They go through your options and help you decide what the right move is.
Check your VA Loan Refinance Eligibility (January 29, 2021).
How To Find A Safe Refinance For VA Loans
VA homeowners have two main refinancing options: the VA Streamline
Refinancing (IRRRL) and VA disbursement refinancing.
The right refinancing loan for you depends on your goals.
If you just want to lower your interest rate and
monthly payment, the IRRRL is usually the best option. There is no need to take
Withdrawing your home equity when you don't need it for a specific purpose –
and no lender should be pushing you to withdraw when you don't need it. If you need to develop your home equity, you will
Apply for VA Disbursement Refinancing. The Streamline program does not allow
Homeowners receive cash upon completion
The VA payout program can also help veterans and service members
With non-VA loans refinance into a VA home loan.
For example, a homeowner with an FHA loan who has a VA loan
The authorization could use the payout program to change loan types without having to change
actually taking out cash.
To find the best deal for your refinancing loan, you should apply to
at least three lenders and compare their offers.
You can do this yourself by contacting the lenders individually. Or, you can work with a mortgage broker who can help you understand your credit options and find the best lender for your needs.
The vast majority of mortgage lenders are decent companies –
Fraudsters are in the minority. However, you still have several companies to look at
to make sure you get the best deal.
Start with known lenders who receive positive customer reviews. If you have friends or family members who have refinanced a VA loan in the past and have had good experiences, you should ask them for referrals too.
How to Compare VA Refinance Offers
After applying to some lenders, you need to make sure that the "credit estimates" they send are compared to their original offers.
Credit estimates are standard
Documents listing your loan offers; including your approved interest rate, loan amount,
Loan type and loan terms.
Lender must send you
an estimate after you apply and they shouldn't change anything
for no good reason to be explained to you.
At least three days later
Before you close, you will receive a "Closing Disclosure" which lists all of the terms
Your new mortgage in an easy to understand format. This is your last chance
to make sure you get the offer you want – and the one that was promised to you –
without derailing your refinancing.
A mortgage loan is only binding once you have signed your final closing papers. If something is wrong before this point, you have the right to discuss it with your lender or just walk away.
As a borrower and a homeowner
The power in the transaction is in your hands.
What are today's VA refinancing rates?
Mortgage rates are really very low
Now, VA loan rates are generally the lowest of all loan types.
If you think a refinance is the right move for you, check out today's interest rates to see how much you could potentially save.
Remember that mortgage rates vary by lender and borrower. So you have to look around to find your best deal.
Check your new plan (January 29, 2021)