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What Is A VA Mortgage Rate Reduction Loan?

By Eric Goodwill

Many veterans, like other Americans, are facing the squeeze of tough economic times. However, many veterans may be able to take advantage of a VA mortgage rate reduction loan. Veterans should look into exactly what this loan can offer them, as well as the restrictions that apply.

How does A VA mortgage rate reduction loan works?

A VA mortgage rate reduction loan is available from any lender. A reduction in the interest rate of your mortgage will always occur when dealing with a fixed rate mortgage, but could possibly result in a higher interest rate if you are refinancing an existing VA guaranteed adjustable rate mortgage(ARM) to a fixed rate. No appraisal or credit check is required by the VA to be eligible, but many lenders will require these. It is best to browse the offers of many lenders, since any lender can make a VA mortgage rate reduction loan to you. The only cost assessed by the VA is a funding fee of one-half of one percent of the loan. This fee can either be be paid in cash or included in the loan.

What are the restrictions of a VA mortgage rate reduction loan?

There are some restrictions that apply to a VA mortgage rate reduction loan. Lenders are not allowed to receive cash from the loan proceeds, and the original loan must be a VA loan in order to be refinanced. In addition, the loan can not exceed the outstanding balance on the existing loan plus closing costs, although $6,000 in energy efficient improvements to the home is allowed. Finally, if you have a second mortgage, the holder must agree to subordinate it, so that your VA loan will be the first mortgage.

Related posts:

1. Do I Qualify For An Interest Rate Reduction Refinancing Loan?
2. What Is An Interest Rate Reduction Refinancing Loan (IRRRL)?
3. What Is A VA Mortgage Rate Reduction Loan?
4. What Is A VA Mortgage Rate Reduction Loan?
5. Can I Ask For A Rate Reduction On My Mortgage?