Refinancing is a common mortgage activity in the current climate of rising interest rates. Many homeowners are hoping to score some savings from low refi rates while it lasts, before the trend continues to make refinancing unaffordable.
Among the refi options available today, loans backed by the Veterans Affairsremains one of the best programs and it appears to be gaining traction in demand. During the third quarter of 2016, the VA guaranteed 350,000 refinance loans, a considerable increase from the previous year’s less than 310,000. Overall, VA loans made up 8.8 percent of all mortgages closed in that period.
The VA’s part of the pie was registered highest in a decade. But this was also corresponded by a decrease in the number of mortgages backed by the Federal Housing Administration, which dropped by 21 percent from the third to fourth quarters of 2016.
The increase in VA loan numbers is highly attributed to the rapid popularization of the program to its target market, aside from the increasing interest rates. The rising home prices should also be taken into account, which allowed many homeowners to tap into their home equity via HELOC or a cash-out refinance.
The average VA loan in 2016 was $253,243 while it was only $243,178 in 2015. The increase went along the appreciation of home values, to make sure homes are still affordable to qualified veterans. Loan limits still vary by counties.
Based on the numbers, the most popular refi program among American veterans is the Interest Rate Reduction Refinance Loan (IRRRL) or more commonly known as the VA Streamline Refinance Program.
The IRRRL refi loans rose to 215,000 in 2016 compared to 195,000 in 2015.
What makes IRRRL a good refi program?
The Interest Rate Reduction Refinance Loan is established to make refinancing easier and faster for seniors. It allows them to get approved for a refi without having to go through the most arduous parts of underwriting. Via the IRRRL, you no longer need to submit your W2s, for example. You don’t have to go through appraisal again, and the cost of refinancing can be rolled into the loan. These are just some of the benefits offered via the VA’s Streamline Refi program.
To be able to qualify for a refi using the IRRRL, your resulting monthly payments should be lesser than what you currently carry, except for when:
- you refinanced to fixed-rate mortgage from an adjustable one
- you refinanced into a loan with a shorter term
- you will use the loan to fund energy-efficient improvements on the home
..in which cases, an approval can still be granted. Your current loan must also be already guaranteed by the VA to qualify.
Although refinancing is popular, that does not mean it is good for you. You need proper self assessment and an evaluation of your future plans in order to properly determine if a refi would give you benefits. Do not rush. Justify your reasons first before pursuing the decision to refinance.