Review the meaning of some potentially confusing terms before applying for a VA Home Loan or refinancing your mortgage with NewDay USA.
Cash-Out Refinance: Cash-out refinances allow you to access the equity in your home. Equity is the difference between your home’s value, and the amount you currently owe on your mortgage. Consider this example: your current mortgage balance is $150,000, your home appraises for $250,000, this means you have $100,000 of equity in your home. A NewDay USA VA Cash-Out Refinance Loan allows homeowners to turn their home equity into cash. This cash is often then used by homeowners to pay off high-interest debt*, fund schooling, or make home improvements or modifications, for example.
* Consolidating your debts may increase the length of time needed to repay the debts and your total finance charges may be higher over the life of the loan.
Certificate of Eligibility: A Certificate of Eligibility (COE) is a part of the process of verifying that a Veteran, Active Duty Member, and Reservist or National Guard Member is eligible for a VA-guaranteed home loan. NewDay USA obtains this on the borrower’s behalf, and the turnaround time is generally very quick.
Credit Card Debt Consolidation: When you consolidate debt, you are taking out a single new loan to pay off multiple debts. The most beneficial aspect of debt consolidation is that you are essentially refinancing the majority, if not all, of that debt to a lower interest rate.
Additionally, with consolidation, your various debts, whether they are credit card bills or loan payments, are rolled into one monthly payment. With a NewDay USA 100 VA Cash Out Loan, you could consolidate your credit card debt and still have cash left over to spend or save as you wish*.
By consolidating debts with a NewDay USA Cash Out Loan, our average customer lowers their payments by $639 a month, $7,664 a year.
*Consolidating your debts may increase the length of time needed to repay the debts and your total finance charges may be higher over the life of the loan.
DD214: A DD214 is an official VA document that displays the nature of your discharge, dates of service, and current classification (retired, separated, Guard or Reserve status). Your DD214 may be needed to help the VA lender confirm your eligibility for a VA-guaranteed home loan.
NGB-22: An NGB Form 22 is Report of Separation and Record of Service for each period of National Guard Service. Your NGB-22 may be needed to help the VA lender confirm your eligibility for a VA-guaranteed home loan.
PITI: The acronym PITI stands for Principal, Interest, Taxes, and Insurance. Collectively, these components make up the monthly mortgage payment.
Prepayment Penalties: A prepayment penalty is a fee that some lenders charge if you pay off all or part of your mortgage early. VA loans do not carry any prepayment penalties. As such, you can pay off a VA home loan early without being subject to any prepayment fees or penalties.
Private Mortgage Insurance (PMI): On many mortgages, borrowers who are unable to put down 20 percent of the loan amount are required to pay a monthly insurance premium. There are no private mortgage insurance (PMI) requirements on a VA loan. PMI has no benefit to the borrower. It is purely to protect the lender against borrower default.
Retirement Points Statement: A Retirement Points Statement is the equivalent of a DD214 noting time served and active/inactive duty training points to determine eligibility of Reservists for a VA-guaranteed loan.
VA Funding Fee: The Department of Veterans Affairs collects the VA funding fee to help cover the VA Loan program’s costs. The funding fee goes solely to the VA.
This fee is a percentage of the total loan amount, and the exact percentage varies from 0.0 percent to 3.6 percent, depending on the type of loan, the Veteran’s military history, if they are a first-time or subsequent loan user, and even the down payment. The VA funding fee can be financed or paid in cash, but it must be paid at the time of loan closing.
Disabled Veterans eligible to receive compensation for a service-related disability are exempt from paying the VA funding fee for any product, purchase, Interest Rate Reduction Refinancing Loan (IRRRL), or cash-out.
More information about the funding fee amount is available from the VA.
VA-Guaranteed Home Loan: According to the Department of Veterans Affairs, a VA-guaranteed loan can be used to:
- Purchase a home
- Refinance an existing loan
VA-eligible borrowers can take advantage of the many benefits offered by VA-guaranteed loans:
- Zero down payment requirements (unless required by the lender or the purchase price is more than the reasonable value of the property)
- Zero private mortgage insurance (PMI) requirements
- Competitive interest rates
- Ability for eligible Veterans to take out more than one VA loan
- Limitations on closing costs
- Loan is assumable by or transferable to qualified borrowers
- No prepayment penalty
Refer to the VA’s eligibility criteria for VA-guaranteed home loans.
VA Home Appraisal: One of the first steps a lender takes once you’re under contract to purchase a home is to order a VA appraisal on the property. Required for every VA purchase and cash out loan, this is an evaluation of the property’s value and condition by an independent VA appraiser. The VA appraiser is tasked with determining the home’s fair market value and ensuring that the property meets the VA’s Minimum Property Requirements (MPRs).