We had to close on our house with a conventional loan last August and my wife and I are finally able/ready to refinance our loan into a VA loan to get rid of PMI, etc.
Our current interest rate is 7.875%, we found a broker that was able to get us 6.75%, but it comes with $30,000 in closing costs that they are able to bundle into the loan.
We obviously are trying to avoid having to pay closing costs all over again, so a family member was telling me that we could do a TRUE no-cost (no closing costs bundled into the loan or paid up front) in exchange for a higher interest rate (possibly closer to 7.25% range).
Is that something that actually possible to do, or are we going to be stuck paying $30,000 in closing costs every time we refinance our loan?
EDIT: I'm 10% disabled so don't have to pay the funding fee
Is it possible to do a true, no-cost refinance INTO a VA loan from a conventional?
byu/iSniffMyPooper inMilitaryFinance
Posted by iSniffMyPooper
4 Comments
Seems like it would just be better to do extra payments to get to 20% equity rather than taking out more high interest debt
If you don’t have a disability rating over 10%, part of your closing costs is the VA Funding Fee, which is 2.15% the first time you use it (or slightly less, if your loan to value ratio is less than 95% or 90%). That’s a big fee that’s not paid out of pocket in a purchase, but it’s added to your loan. On a refinance, it works a little differently. Going forward, if you refi the VA loan againn(on a streamlined basis, meaning you aren’t pulling out cash, paying off debt, paying off a non-VA mortgage, etc), the VA Funding Fee will be 0.5%, unless you have a disability rating.
u/LoanSlinger is absolutely correct regarding funding fees and the % you pay based on the new LTV. The 30k in fees includes your funding fee most likely. We don’t know your current loan balance so not sure how much of it is funding fee or actual closing costs. Also you will have an escrow account. That’s not loan fees although it looks like it on a loan estimate. You will get a refund of your current escrow so look at that as a wash.
as far as looking for a no cost loan… are you planning to move in the next year or two? That would be the only reason to not refinance or do it with zero costs.
Also, VA rates are in the high 5’s/ low 6’s depending on where you are. If you want to pay points you can go lower or if you want to get a lender credit you can go higher.
OMG…
Why were you told to close with conventional to begin with?
Also a 6.75 rate in today’s market for VA real time is really padded with margins.
Example: 720 Fico, 800k price
6.75% 0-point has a whopping 22k in commissions built in and you’re being told 30k closing costs on top of that
You can get away with 6.125-6.25 0-point or go 6.75 with lots of lender credits
Keep talking to more brokers and happy to help if you’d like to discuss in private, Just DM