30 yr fixed conventional vs VA loan refi?

User Forum Topic
Submitted by treehugger on July 12, 2016 - 10:56am

Wondering if anybody knows the basics for a VA refi vs conventional? Trying to convince my dad who served in the air force to refi and I work with a bunch of vets who are refinancing for 2.75 30 yr fixed.

I talked to one lender and he told me there was a 2% funding fee for VA, unless you are a disabled vet (pretty much everyone I know nowadays has some level of disability). If my parents owe $300,000 that is $6,000 which just seems ridiculous? So unless you are trying to avoid PMI or are disabled steer clear?

My dad is old school and has never gone after any VA benefits, so my initial thought was this was an amazing chance to jump in, now seems not worth it?

Submitted by FlyerInHi on July 12, 2016 - 11:05am.

VA is awesome if you want to do zero down. My friend used VA to buy a house at the bottom. It's now almost tripled in value.

There is a funding fee which gets rolled into the loan. I think you need to be discharged disabled to avoid it. But not sure. Worth looking into.

Better than FHA.

Submitted by bearishgurl on July 12, 2016 - 12:53pm.

treehugger, if he hasn't already, your dad needs to apply for his VA "Certificate of Eligibility" to give to a prospective lender when he applies for a VA-backed home loan:

http://www.vba.va.gov/pubs/forms/VBA-26-...

In your dad's case of owing ~$300K, he needs to first find out if he qualifies for a conventional refinance because that would certainly be much cheaper mortgage money to borrow, especially if his credit is good to excellent. Having a "zero down" mortgage provision won't do him any good on a refi unless he doesn't currently have any equity.

Because it is a refi, your dad won't be able to ask any "seller" to help with his funding fee, and, in any case, CA homebuyers have historically never had much success with this request (of individual resale-sellers) ... especially in the coastal counties.

I'm not sure if conventional mortgage rates currently match the prevailing 30-yr VA fixed rate but even if they don't but come close, a $6K up-front payment will pay for a LOT of years' payments at slightly above the rate the VA guaranteed loan programs are offering.

I've known many vets who have never used their VA mortgage loan benefits here in CA for the reasons above ... as well as the fact that the VA-backed mortgage loan ceiling used to be quite a bit lower than the FF conventional conforming loan ceiling. However, this is not the case today.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.