Refinances are available in many shapes and sizes.

First of all, to explain, a “refinance” in the eyes of a lender is whenever you already own the property and are financing it with a new loan (even if owned free & clear).

The amount of the refinance dollars available will be determined by your property’s value, your credit worthiness (credit history and current ratings) and your ability to handle the new payments(“qualify”) in the lender’s judgment. If these items are put in perspective, then all that remains is to choose one of the many loan programs available, some of which include:

An FHA refinance “cash out” to 85% of value or “no cash out” to approximatly 97% of value (within its maximum allowable loan limit, of course). A conforming conventional refinance generally allows “cash out” to 75% and “no cash out” to 80% (though higher LTV’s are available in special programs.) A non-conforming (or “jumbo”) conventional refinance “cash out” depending on loan amount, allows from 65% to 75% “no cash out”; again depending on loan amount, from 70% to 80%.

Refinances are done for many reasons, which might include:

• lowering current interest rate
• lowering or sometimes extending the term
• to obtain cash for any number of reasons
• to pay off a second trust deed
• to “blend the rate” of a first and second trust deed
• to settle property matters in a separation or divorce
• to pay off a former partner and take them off title.

Anything that is legal and does not cause additional, unknown obligations is usually acceptable to the lender.

If you are able to lower your current rate and “recover” the cost within a reasonable amount of time, refinancing could be a wise move. For example, say you are able to reduce your P & I (principal and interest) payment by $100 per month and the loan costs totaled $2400, you would recoup these costs in 24 months. After that time, the savings goes in your pocket – if you plan on keeping the property more than 24 months, it would make sense to refinance.

Maybe you are now in a position to shorten the term of your loan and take advantage of lower interest rates offered for 15-year amortization vs. 30-year amortization.

You can save thousands of dollars by paying on a 15-year basis compared to a 30 year. For example, $100,000 at 6.5% for 15 years = $871.15 X 15 years = $156,798.89. At 7.0% for 30 years = $665.31 X 30 years =$239,510.98. Total savings over the term = $82,712.09; Or, conversely, a person may wish to refinance to restructure from a 15-year to a 30-year loan. Maybe income has changed, and the 15-year payment is just too hard to handle or maybe the additional cash flow is needed every month for another purpose (such as expanding a business, etc.).

As mentioned previously, a lender’s concern, beyond legalities, is that a borrower can reasonably be expected to be able to pay back the new loan, not in how the cash will be used. A person may use their property as security to obtain funds at more reasonable rates than, say, a personal, unsecured loan or a loan against a credit card.

“Government Mortgages” are generally considered to be those loans insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA).

FHA

The National Housing Act of 1934 established a Federal program to encourage and facilitate home ownership in response to the Depression’s devastating impact on real estate lending. The Federal Housing Administration (FHA) was created to administer the program by providing insurance protection to private lenders who originated mortgages. FHA is now a part of the Department of Housing and Urban Development (HUD).

FHA is not a direct lender, but provides for insuring low-interest, low-down payment, assumable mortgages against foreclosure loss. The Mortgage Insurance Premium (MIP) or Mutual Mortgage Insurance (MMI) collected on each FHA loan, as established by HUD, helps defray the cost of the insurance program.

FHA has made buying a home easier and less expensive than other types of real estate programs by allowing more borrowers to qualify for a home loan. FHA loans are not restricted to just the first-time home buyer, but the loans are very well suited to them. Many others who currently own a home and who are looking to move up use this program as well.

FHA loans have several restrictions: You can not have more than one FHA loan at any one time, and you have to live in the property. There are also maximum loan amounts that depend on the county the property is located. Other loan limits apply for two, three and four-unit properties.

Advantages of the FHA loan programs are:

Minimal down payment and closing costs – 3.5% of the purchase price!
Easier credit qualifying guidelines than conventional loans!
More lenient debt-to-income ratios and job requirements!

FHA loans can be used to purchase a single family home, a condo, a townhome or a PUD. There isn’t a maximum sales price restriction, but there is the maximum loan limit based on the county the property is in. If you currently have an FHA loan, there are streamline and cash-out refinances available. Easily change the rate and term of your current loan.

The loan programs available include:

Fixed rate – 30 and 15 year fully amortized.
Adjustable rate – 5/1 Adjustable Rate Mortgages (ARM). This is one of the best ARMs available as it only has a 1% adjustment interval cap rate and a 5% lifetime cap.

VA

The Veterans Administration (VA) loan guarantee program was created in 1944 to help service personnel returning home from World War II obtain no-down payment home financing at reasonable interest rates. Since that time, any veteran who has served a minimum time in active duty in a regular component of the United States Armed Forces can become eligible for VA benefits for use toward the purchase of a home. Unmarried, surviving spouses of veterans who died as a result of service injuries are also eligible for VA financing, as are the spouses of MIAs or POWs who were on active duty and listed as missing for more than 90 days.

Like FHA, VA is not a direct lender. It guarantees a certain portion of the loan amount to enable private lenders to make 100% loans with some protection against foreclosure loss. A VA funding fee is paid to the Veterans Administration to help offset its costs of the loan program.

There is one main difference between FHA and VA loans. With a standard VA home loan an eligible Veteran can truly purchase a home with almost no cost! Except for the Jumbo VA loans, no down payment is required – 100% of the purchase price can be financed! And if the seller agrees to pay closing costs, you can literally purchase a home with very little out-of-pocket expense!

The Veteran must have proof of eligibility, which is issued by the VA in the form of a Certificate of Eligibility. There is no mortgage insurance to be paid like in other low down payment programs and no prepayment penalties for early pay-off.

The loan programs available include a fixed rate, 30 and 15 year fully amortized loans.

Once funded, most FHA and VA loans are “pooled” into Government National Mortgage Association (GNMA or Ginnie Mae) mortgage-backed securities and then sold into the secondary mortgage market with guarantees by GNMA which represent the full faith and credit of the Federal Government. Ginnie Mae is a division of HUD.

Let California Funding tailor the right financing for your loan. You’ll enjoy our commitment to fast, friendly and efficient service paired with the latest technology to offer the most flexible, affordable pricing possible. Contact Daryl Roe to get prequalified today.

Mortgages to help you purchase a property come in many shapes and styles. At California Funding, we are proud to offer literally dozens of choices for almost any situation, and our professional expertise can help you through the maze.

For example, we offer:

• Financing for your first home, or any one thereafter.
• Mortgages for vacation or retirement homes.
• Long-term financing for investment (rental) properties.
• Lot loans when you are buying a lot on which to build a primary residence or vacation home.
• Construction loans when you are ready to build that residence or vacation home.
• Special mortgages designed for no down payment, no closing costs out-of-pocket, or low down payment, low closing costs.
• Alternative financing for persons with previous credit problems.

Our financing choices include FHA loans, VA loans, Cal-Vet, standard Conforming Conventional loans and Non-Conforming (“jumbo”) loans. Within these choices, you will find 100% conventional financing and FHA loans with a second trust deed through the State of California that allows you to buy a home with no down payment. All loans have certain qualifying criteria that must be met.

For instance, the California home financing program is available for owner-occupancy only, sometimes for first-time home buyers only, sometimes for buyers with certain income limitations, and always as the funds are available from the State. However, it provides an excellent way for people to buy a home with little or no down payment and often the closing costs can be financed also.

The amount of home you can afford depends on your income and your debts, and your credit history. Contact Daryl Roe at California Funding, for further information and to discuss the type of loan that will work best for you.