Tuesday, June 19, 2012

How to Refinance a VA or FHA

By Don Rafner

If you hold a government loan from the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA), you may want to refinance it to take advantage of lower interest rates and the lower monthly mortgage payments they can bring. Fortunately, refinancing either loan type is a relatively simple process.

Contact your mortgage lender by calling the number on your most recent mortgage statement. Tell your lender that you hold either a VA or FHA loan, and that you'd like to refinance it, with the goal of lowering your interest rate and monthly payment.

Send your lender by fax or mail the paperwork it will need to determine if you qualify for a refinance. This includes the two most recent copies of your federal income tax returns, your credit card statements, the statements from your other outstanding loans, your savings and checking account statements and your two most recent paychecks.

Give your lender permission to have an appraiser determine the current value of your residence. This a key step. If your home's value has dropped, you may no longer have enough equity built up to qualify for a refinance of your FHA or VA loan.

Let your lender run a credit check on you. Lenders today rely heavily on credit scores--a numerical representation of the way you have handled your finances in the past--to determine if borrowers qualify for loans. They also use these scores to determine the interest rates they charge borrowers. If your score is too low, under 620, you might not qualify for a refinance or for the lowest interest rates that make a refinance worthwhile.

Set up a closing date with your lender for your new FHA or VA loan if your home appraises highly enough and your credit is good. Make sure to sign all the paperwork your lender needs to finalize the refinance.

A home appraisal isn't free. Lenders will usually charge you about $400 for one. You'll have to pay this even if your home doesn't appraise at a high enough value to permit a refinance. You should be certain, then, that your home's value hasn't dropped too dramatically before you apply for a mortgage loan.

Be patient. When interest rates drop, many homeowners attempt to refinance their loans. It may take a bit longer for your lender to get to your VA or FHA refinance during these busier periods.


http://www.lenderva.com

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