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Refinancing Information

Refinance Loans:

Here are three basic questions to ask when refinancing:

#1 How long will it take to recoup the cost of the refinance? If you are refinancing to only to lower your interest rate (and not to pull cash out of your home), you really need to know how long it will take you to actually start saving any money from the refinance. 

#2 If you wish to pull cash out of your home you’ll need to find out if extending the term of your home with a new 1st mortgage refinance is your best option. You may also consider a second mortgage, home equity line of credit (HELOC) or a personal loan to get the cash you need. A 1st mortgage refinance is not always your best option, so contact one of our Mortgage Loan Officers to explore all the options AAFCU can offer you.

#3 if your home value is less than your current mortgage you should ask if you qualify for one of the programs specifically designed to assist Borrowers in this situation. Click here for information on the programs called "HARP" or "HAMP" refinance programs.

It’s always good idea to have one of our Mortgage Loan Officers speak to you about your best choice for a refinance loan, but here is some information that may assist you as you are thinking about refinancing.

What are your refinance options? VA Loans, FHA Loans, Conventional Loans click on the loan type for the pro's and con's of each type of loan.

VA Loans

VA has a special refinance program if you currently have a VA loan called an “IRRRL” (Interest Rate Reduction Refinance Loan) and is also referred to as a “ VA Streamline”. This program requires less documentation from the borrower and only has a .5% Funding Fee.

Cash Out Refinances: VA allows up to 100% of the value of your home to be refinanced in a cash out refinance. Conventional loans typically only allow up to 85% of your home’s value. AAFCU offers this 100% Cash Out program but not all VA lenders do.

If you are Veteran that is considered disabled by the VA, then there is no reason not to do a VA loan because the Funding Fee (see Con’s Below) may not apply and makes the VA loan an excellent option. 

You can even do a VA Streamline (IRRRL) refinance loan on a Rental Property if you currently have a VA loan. It sounds amazing, but VA does this because it puts the borrower in a better financial position by lowering the payment which results in a lower risk to VA.

VA loans do require something called a ‘Funding Fee”. The Funding Fee can be as much as 3.3% of the loan amount and is paid at closing. If the Veteran is considered disabled by Military, then the Funding Fee is waived.

FHA Loans

FHA offers something called a “Streamline” refinance. This type of refinance is very easy on the Borrower because it requires very little documentation.

If your FHA loan originated on or before May 31st 2009, the Mortgage Insurance fees for both up-front and monthly insurance payments are greatly reduced.

FHA loans typically have lower rates than Conventional loans because they are insured by the Federal Government and therefore presents a lower risk to the lender. They have more lenient rules for credit, income, assets and employment evaluation which allows some borrowers to qualify that otherwise wouldn’t be able to.

FHA loans are required to have both an upfront Mortgage Insurance premium (MIP) as well as a monthly Mortgage Insurance (MI) payment.

The upfront fee is 1.75% of the loan amount and the monthly insurance payment can be as high as 1.35% of the loan balance (this monthly amount is an annual percentage, but is paid in monthly installments as a part of you payment).

FHA allows the borrower to request the removal of the monthly Mortgage Insurance payment, but only when they have paid down the loan to 78% of the original homes value or after they have paid it for a minimum of 5 years (whichever is longer).

Conventional Loans

Conventional Loans have many more loan options than FHA or VA loans.

Conventional Loans currently allow refinances up to 97% of your loans value, (to lower your interest rate but not to take equity out of your home) and can actually exceed that amount under the special HARP or HAMP programs—(See below)

Conventional loans allow Monthly Mortgage Insurance to be removed (if your loan has Mortgage Insurance) once the home has reached a 20% equity position in most circumstances, unlike FHA loans.

Also, it’s worthy to note that because AAFCU is a Credit Union, our borrowers get lower rates than most Banks or Brokers can offer.

Conventional Loans don’t allow more than 85% of homes value for Cash Out loans. Both VA and FHA have special refinance programs that allow higher percentages depending on the refinance type.

HARP and HAMP Conventional Refinance Programs

These two programs were created by the Federal Government to assist Homeowners who have found themselves with a mortgage loan balance which is higher than the value of their home to take advantage of today's lower mortgage rates. However, the loan must have been sold to Fannie Mae or Freddie Mac in order to participate in either of these programs. If you know your mortgage loan is not owned by either of these two institutions, (you can easily check online at the weblinks below) you still have a chance of having the institution that does own your mortgage make some similar arrangements.

HARP (Home Affordable Refinance Program) for Fannie Mae loans
https://knowyouroptions.com/loanlookup to find out of your mortgage is owned by Fannie Mae.

HAMP (Home Affordable Modification Program) for Freddie Mac loans
https://ww3.freddiemac.com/loanlookup/ to find out if your mortgage loan is owned by Freddie Mac.

The reason there are two programs with very similar names is because Fannie Mae and Freddie Mae each have a separate program for the loans they own.