With rates seeming to drop to a point where it makes sense to refinance, I have a couple of questions about the VA IRRRL loan and hope someone in the community may be able to help me.

My wife and I purchased a home, closing recently, 10/2/2008. We used my VA entitlement. At the time we received a rate of 6.375% and with rates dropping I was wondering if I could refinance my home through the IRRRL given how recently I closed.

Secondly, I reside in CT and was wondering if anyone could refer me to someone who is good/experienced with these types of loans.

Thanks for the look and any help!

Well, you will have certain closing costs again and you will increase your balance, but if you can knock 1% or more from your rate, it may be worthwhile to do.  If you get your closing costs back in payment savings in a reasonable period of time and you will be in the home for a more extended period, I would say to explore it.  You may be able to find 5% and no points sometime in the next few weeks.  Or maybe lower.  Cannot suggest a lender, but you can apply and float until you get the rate you desire.

Thanks Mister VA.

In my first purchase I had went with a broker who had "VA expereince" and turns out, I knew more about VA loans than they did. I do plan to put cash down for the closing costs and other costs to ensure my loan amount remains the same, so I think it would be worthwhile to pursue a new loan, I just can't seem to get a response from my lender. Anyways, I did have a question on your comment about floating until I get my rate. If I do that, do I also run the risk of the rates going up on me?

When floating your rate, you do run that risk.  I think what he is referring to is this: Get your application in.  Work with your originator to determine what rate you need to have enough benefit to proceed with the loan.  Have your originator lock you in when the rates hit that point and then complete the process.

Dear Kophjager,

My name is Michael Bradley from **************, located in *******. I can help you because I am licensed in CT.

Please call me at ***-***-**** when you get a chance. I am available 24/7, just like when we were soldiers.

Thank you very much and I look forward to hearing from you.

Moderator Note: No solicitations allowed in forums.

Kent Mikkola:

When floating your rate, you do run that risk.  I think what he is referring to is this: Get your application in.  Work with your originator to determine what rate you need to have enough benefit to proceed with the loan.  Have your originator lock you in when the rates hit that point and then complete the process.

precisely

I am also considering the IRRRL Program. I was wondering if you could enlighten me on what would be some of the down sides or con's of proceeding with this program?  Because the program seems to good to be true and if this program is so good why doesn't all veterans take advantage of this offer?

Thanks in advanced!

VA figures they have a contingent lien interest in the home anyway and if it becomes easier for the veteran to make payments, there is less likelihood of foreclosure.

Don't get hosed by points and origination fees.  If you can save 1% or more on the rate, this program should be used by all veterans with VA loans IMO.

Thank you very much for your advice.  when you say getting hosed by point and originator fee's; what does that mean and what should I be looking for to avoid this pitfall?  My first question would be how exactly does the point system work? and #2 is what's your advice on originator fee's?  Is it basically shopping around for the lender who offers the smallest fee's?  Or is it something that has to be negotiated with the lender of my choice?

Again thanks for the advice.

William Bryant:

Thank you very much for your advice.  when you say getting hosed by point and originator fee's; what does that mean and what should I be looking for to avoid this pitfall?  My first question would be how exactly does the point system work? and #2 is what's your advice on originator fee's?  Is it basically shopping around for the lender who offers the smallest fee's?  Or is it something that has to be negotiated with the lender of my choice?

 

Again thanks for the advice.

A VA IRRL refinance does not require a lot of work.  Your originator should be able to do it for 1-2% in origination/broker fees (the smaller the loan, the higher the fees) plus normal closing costs.  I wouldn't necessarily shop for the lowest fees, as some people lie upfront to entice you.  If the originator truly will do a loan for next to nothing, you probably will get what you pay for.

Are there any hidden secret's like there were during the sub-prime era? I really don't want to get sucked into anything I will regret later, so I asking alot of questions that I believe other's want tell me or might lie about; this way I can balance what they're telling me against the truth.

P.S. I want you guys to know that you all have been very helpful, and pray you have a blessed 2009.

William Bryant:

Are there any hidden secret's like there were during the sub-prime era? I really don't want to get sucked into anything I will regret later, so I asking alot of questions that I believe other's want tell me or might lie about; this way I can balance what they're telling me against the truth.

 

P.S. I want you guys to know that you all have been very helpful, and pray you have a blessed 2009.

We are well away from the sub prime era and VA approved originators are going to be as trustworthy a bunch as you will find.  There are still some bad apples out there, but they are few and far between.  Trust your instincts and you won't be disappointed.

Just a quick add. The fee's that can be charged and can't are very specific with VA StreamlineLoans.  For example a broker (not a lender, they can hide it) can NOT charge more than 1% origination or any discount points that get retained by the broker (means you are actually buying down the rate if you pay discount points). To explain it simple, lenders could charge discount points that don't really get you a lower rate where a broker can't (it's all the backend of our business). Also there can never be a processing, underwriting, tax service fee, application fee, title closing fee charged to the borrower.

With all that said, shopping for the lowest fee's shouldn't be to tough since the only thing that get retained by the broker is the origination fee and they will have to pay all the other fee's on your behalf listed above (they are legit 3rd party fee's charged on most loans and will total $600-$1,200).

So no secret's allowed on this program. VA also restricts the terms of the loan so there can't be hidden prepayment penalties or other "sub-prime" stuff.

Happy New Year..

Patrick,

I'm going to expose the soft underbelly of our industry, but on most loans we only do a few hours of paperwork. Problem is that we spend 40 hours looking people who need us to do paperwork!

VA has a list of settlement fee's that can not be charged to the borrower.  The most typical that you'll see on a IRRRL being paid by the broker are:

Processing, Underwriting, Doc Prep, Title Closing & Tax Certificate

These fee's will add up to $800-$1,300 depending on who's used to provide these services.  Outside of these fee's you'll still have a mortgage credit rating (similar to a credit report but just the mortgage), title insurance, recording fees, escrows for taxes & insurance and the VA funding fee unless you're exempt.  Also depending on your loan package an origination fee that gets capped at no more than 1%.

Also I would add, just because there is less qualifications for the borrower to get an IRRRL doesn't mean the broker is doing less work.  They should still be shopping your loan for the best rate, completing application and disclosures, running updated figures when payoffs come in and monitoring the loan underwriting (all the same things we do on a normal refinance).  On a typical loan an Originator might do 2-3 hours of file work and on a streamline that might be 2-2 1/2.  The reason we like them so much isn't that they are less work but rather there is much less fall-out. We don't have to worry about low appraisals, lost jobs, credit history, etc.  In terms of stress and brain damage they are half a normal loan at least.

I would take a guess and say that I don't see VA loans going under 5.0% unless you're willing to pay discount points. Biggest reason is VA loans follow the Ginnie coupons (like fannie but for government) and the Ginnie 1 (most popular and traded) moves in .50% increments. Meaning we'll need to get to 4.50% paying 1% or better to be able to offer it to the public (because we're paying settlement fee's and can't charge more than 1%).  Of course there are exceptions for larger loans or if your broker is just feeling generous (code for desperate).

If you can get 5% right now without paying any origination or discount points that's a good loan. If you can't then shop around or wait and see.

William Bryant:

Thank you very much for your advice.  when you say getting hosed by point and originator fee's; what does that mean and what should I be looking for to avoid this pitfall?  My first question would be how exactly does the point system work? and #2 is what's your advice on originator fee's?  Is it basically shopping around for the lender who offers the smallest fee's?  Or is it something that has to be negotiated with the lender of my choice?

 

Again thanks for the advice.

I never advise a veteran to pay more than 1/2 point on an IRRRL.  Total.  If you can pay zero, that is preferable.  It takes way too long to get back points in payment savings.  The veteran is better off with a higher rate and lower total closing costs in most cases.

I was wondering if someone could explain the loan discount fee and the difference between points?  And what percentage is good?

Thanks for the response. It's very informative. I'd love to find a lender who didn't charge origination fees :) but I don't think that's going to happen. I've checked around with several brokers and lenders and one in particular is doing most of his work currently with VA refinances (I'm sure refis are keeping you guys busy these last few weeks)...It seems like the best deal but I'm trying to do my homework and bouncing the figures against credible people like yourselves definitely helps..Thank you

I'm looking at IRRRL refi at 5% (5.385% APR) paying no points on $177000. His rough good faith estimate is about $3200 closing

broken down...

1% origination fee + .5% VA funding fee = ~$2600
3rd party (lawyers) = ~$600

I understand from earlier posts that you can't be charged for processing, underwriting, tax service fee, application, or title closing fee.  IRRRL refi doesn't require credit check, appraisal, inspection. 

Do most brokers just charge the flat 1% as "cost of doing business" and leave it at that? Based on what you said above, the 1% (approximately $1800) is going to come pretty close to that. I'm working with the same brokerage and the best rate he could find me was with my current lender (Wells Fargo).  So I'm wondering if it's the same broker and same lender if some of these origination fees can be negotiated? Or should I consider this to be a good deal and roll with it. You said that a 5% without any origination or points is a good loan...are there brokers/lenders that don't charge any origination fees?? Maybe I misunderstood..

Thanks so much again for all of your expertise.

I'm going to disagree with Mister VA about how much to pay in discount points and when to refinance. Making a blanket statement to say a Veteran shouldn't pay more than 1/2 a point because it takes to long to recoup the cost is just wrong. And to imply that anyone charging more than 1/2 a point is doing an injustice to a veteran is just wrong.  Any qualified mortgage broker can do a cost vs. reward breakdown for each situation. With yields so tight between interest rates right now a 1 point fee for example might by .50% in interest rate. Easily justifying the cost.

I would argue that every situation be needs to be anaylzedif your thinking of refinancing. Interest rates and yields under today's circumstances and events are to sporatic to make a general statement. If someone is on the fence or decline a loan because they have to save 1% in rate and pay no more than a 1/2 point to get there could be missing the lowest rates of a lifetime.  Making general statements like that is careless and reckless in a consumer forum.

I was wondering if someone could explain what is the loan discount fee and the difference between points?  And is 2% in loan discount fee's good?