VA Refinance Loan Limit Question

[Anonymous]

Hi,

I have a question regarding the loan limit on a VA refi. I am very close ($2000 below) to the limit for my county. It makes a big difference to me if the funding fees can be rolled into the loan even if that puts the loan above the limt.

I have gotten conflicting information. One loan officer I spoke to sems to think the rules just changed regarding this in April and that you can no longer do this with refinances if it puts you above the limit. I just looked at the VA's website at the "WARMS" (Web Automated Reference Material System) Lenders Handbook and it says for a cash out refinance, the funding fees may be included along with $6000 worth of energy efficient improvements.

Does anybody know the current rules regarding VA refinances?

Thanks!

[Anonymous]

The loan limit is based upon the total loan amount, including the Funding Fee.

Many lenders limit a cash out refinance to 90% of the value of the home, and that is the base loan amount. The Funding Fee can go on top of that amount. That may be where the confusion is.

What county do you live in? What loan amount are you looking at? Some lenders offer high-balance VA loans also.

[Anonymous]

Thanks for responding!

I'm in Howard Co, MD which is 500000.

VA is probably the best fit for me. My home will probably appraise a little lower than what I need to be below 90% LTV. My EQ score is 690 and TU is 669, so not excellent credit. My utilization is around 50% which I'm really concerned about. My DTI is still decent even with high utilization.

I have enough reserve to squeak out the funding fee at closing if I need to, but I was going to use that cash to pay down some debt. I don't know if I should pay down debt first to get me to about 37% util and pray for better scores for a better interest rate for a conventional but I don't know what that will get me with greater than 90% LTV. The VA rates are the better, in my circumstances but the fee and closing will deplete my reserves. I'm really concerned about my util because I don't have the cash to pay down debt and pay funding fee.

Do you know if NFCU offers the jumbo VA?

[Anonymous]

I am not aware of what Navy Fed offers.

I think a VA Jumbo would  be something for you to look at. The rate is very close to regular VA, and then you would not have to worry about buying out the funding fee, and keep your reserves intact.

[Anonymous]

I haven't seen VA Jumbo. What is that? Would my util be a problem?

[ShanetheMortgageMan]

It's a VA loan that goes above a $417k loan amount & up to the county loan limits.  Some VA lenders won't go past $417k even if the county limit is above that.  So you may talk to a VA lender who says "Oh, we only go to $417k in Howard County, sorry" even though most VA lenders will go to $500k in Howard County.  When you are financing more than $417k (total loan amount - including the funding fee) it crosses the threshold into a VA jumbo loan.

An underwriter doesn't give utilization much weight.  However utilization affects your credit scores, so indirectly high credit card utilization can hurt someone's chances at qualifying... but high utilization alone isn't normally an issue.  In your situation you would only be doing it for a potential better interest rate (which at most, would be .125%), as an underwriter wouldn't be too concerned.

[Anonymous]

Agree with Shane. Utilization will not matter much to u/w. I would not suggest you use funds to pay down cards, hoping to get a higher score and thus a better interest rate. Using those funds to buy down your rate would be much more effecient use.

[Anonymous]

OK Guys,

I called the bank back and they said they could refi the mortgage with VA loan and here's how to work it to keep my reserves intact.

They can do the loan for above the county limit. So I would do the VA loan with cash out in the amount of funding fee and closing. The amount above the county limit will be outside the VA guaranty so I would have to pay 25% downpayment on that amount (which in my case means I must have that amount of equity in home). I would pay the funding fee out of pocket and closing out of pocket, but receive the money back from the cash out.

Does this make any sense?

[Anonymous]

So they are having you pay 25% of the amount over the county limit in downpayment in addition to paying the closing costs and funding fee?

I would suggest you look at a high balance VA loan which would allow you to finance the funding fee, closing costs, and have you coming in with $0. It seems cleaner, maintains your reserves, and is not as dependant upon your appraisal.