Today, there are many finance options when it comes to refinancing your home.  I will discuss the VA Home Loan Refinancing options. Below are general descriptions and guidelines concerning both options and the Energy Efficient Mortgages (EEMs) add-on. 

The first is called the Interest Rate Reduction Refinance Loan. This loan is a strictly a streamlined no cashout loan.  The VA does not require an appraisal to be done on the property.  You are paying off the balance of your existing mortgage to reduce your monthly payment. The loan term (ie: 30, 25,20 and 15-year) will remain the same plus 10 years unless the term of your loan is already a 30-year term.  If your Principle & Interest (P & I) payment increases by 20% Allied Mortgage Group's underwriter will determine if you would qualify for the increased payment.  The closing costs are incorporated into the loan with certain charges allowable by the VA.    

The second refinance option is the Cash-out Refinance.  This is a true cash out program.  This will allow you to refinance your loan into a lower interest rate and get cash back at the closing table.  This loan requires an appraisal. An appraisal is to see if your house appreciated in value within the neighborhood of where you live.  The appraiser will look for comparables of similar properties that have settled within a 1 mile radius and closed in the last 6-12 months.  If your home is in a rural area the comparables might be further away and would have to be explained why the comparables are not within the 1 mile radius. 

The maximum loan amount for the Cash Out Refinance has been changed to meet 100 percent of the Notice to Value amount plus the closing costs and funding fees which do not exceed the maximum loan amount as set by Freddie Mac in the Philadelphia Metro area is $417,000.   

The last option of refinancing is an add-on to both types of loans that is allowable by the VA.  This is called the Energy Efficient Mortgage program.  The following is quoted directly from the VA handbook as I was instructed by the Regional Loan Servicing Center. 

EEMs are loans to cover the cost of making energy efficiency improvements to a dwelling. They can be made in conjunction with a VA refinancing loan secured by the dwelling. Acceptable energy efficiency improvements include, but are not limited to · solar heating and cooling systems, including solar systems for heating water for domestic use · caulking and weather-stripping · furnace efficiency modifications limited to replacement burners, boilers, or furnaces designed to reduce the firing rate or to achieve a reduction in the amount of fuel consumed as a result of increased combustion efficiency, devices for modifying flue openings which will increase the efficiency of the heating system, and electrical or mechanical furnace ignition systems which replace standing gas pilot lights · clock thermostats · new or additional ceiling, attic, wall and floor insulation · water heater insulation · storm windows and/or doors, including thermal windows and/or doors · heat pumps, and · vapor barriers.

The requirements are as follows for the EEM.

Funds for energy efficiency improvements are considered part of the total loan, which must be secured by a first lien. If the labor is to be performed by the veteran, the loan increase will be limited to the amount necessary to pay for materials. 

A loan for existing property may be increased by up to $6,000 for energy efficiency improvements at the option of the lender and veteran at any time up to loan closing without VA’s prior approval. Allied Mortgage Group's underwriter must determine that the proposed weatherization and/or energy conservation improvements are reasonable for the particular property.

Allied Mortgage Group's loan professional will evaluate the veteran’s ability to pay the increased loan payments caused by addition of energy efficiency improvements.

For energy efficiency improvements that will increase a loan amount by more than $6,000, the amount of the increase must be supported by an increased valuation in an equal amount.

Information on EEMs is provided to a veteran who applies for a loan which requires a Notice Of Valuation (NOV) (that is, a loan for a home purchase or cash-out refinance). The NOV includes the following notice to the veteran:

“The buyer may wish to contact a qualified person/firm for a home energy audit to identify needed energy efficiency improvements to the property. In some localities, the utility company may perform this service. The mortgage amount may be increased as a result of making energy efficiency improvements such as: Solar or conventional heating/cooling systems, water heaters, insulation, weather-stripping/caulking, and storm windows/doors. Other energy related improvements may also be considered."

The mortgage may be increased by:

· up to $3,000 based solely on the documented costs

· up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs, or

more than $6,000 subject to a value determination by VA.

If you have any questions about the VA refinance programs contact Allied Mortgage Group or contact the Veterans Administration Regional center. You can find information online at www.homeloans.va.gov