Military Homebuyer Colorado Springs January 2014 | Page 17

GET STARTED

LOCAL

CULTURE

VA LOAN

SO, WHO IS A GOOD FIT FOR A REFINANCE LOAN?
Now that we have taken a look at the numbers for our hypothetical
borrowers A, B and C, it's time to decide which of them would greatly benefit
from refinancing their home loan. Will it be borrower A or B, who both want a VA
Streamline to lower their monthly payments; or will it be borrower C, who needs
to take cash out for medical bills and other outstanding debt?

WELCOME

HOMEBUYER

THE FOUR MAJOR
REFINANCE OPTIONS:
CONVENTIONAL
May be difficult to get with a
debt-to-income ratio above 41%.
A Cash-Out refinance is usually
capped around 85% of the
home's value.

BORROWER A

Need to have a credit score
around 740 for best rates.
May have to pay private
mortgage insurance.

HELOC

PROBABLY NOT A GOOD FIT.
Saving even $50 a month is nothing to sneeze at, but the closing costs
on this refinance mean it will take Borrower A more than 13 years to pay
back the expense. Even if this is the borrower’s “forever home,” this
isn’t an ideal refinance situation.

Homeowners typically eligible
for line of credit equal to a
percentage of the home's value
minus the mortgage balance.
May pay transaction fees.
Balance of HELOC is due in full
when the term expires.

FHA

BORROWER B

Only available on an FHA
mortgage.
Credit and underwriting
standards are less restrictive.
Cash-Out refinance typically
cap at 85% of the home's value.

A GREAT CANDIDATE
Borrower B is saving $175 per month, and even though the refinance will
add to their principal balance, it’ll take little more than a year to recoup
the cost. They will save just over $63,000 when the mortgage term ends.

Must pay private mortgage
insurance unless homeowner
has a 15-year mortgage term
and at least 10% equity.

VA LOANS
Flexible credit and underwriting
requirements.

BORROWER C

Approved lenders refinance up
to 100% of the home's value.
No private mortgage insurance.
Some VA Streamlines can be
processed without appraisal.

A GREAT CANDIDATE
The monthly payment increases by about $140, but Borrower C is able to
take out $30,000 for bills and debt, and lower the overall interest rate on
a $200,000 purchase.

Military homeowners with an
FHA or conventional mortgage
can refinance into a VA loan.

ColoradoVALender.com

Colorado Springs Homebuyer

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