If your current mortgage is a VA home loan, there’s a good chance you’ve received unsolicited offers to refinance? Sometimes those offers seem too good to be true. And, guess what? They probably are. The U.S. Department of Veteran Affairs (VA) and the Consumer Financial Protection Bureau (CFPB) have issued their first evet “warning order” to veterans and active-duty service members with VA home loans.
Here are some of the offers to watch out for:
- Large amounts of cash back
- Extremely low interest rates
- The ability to miss or skip mortgage payments
- Zero out-of-pocket closing costs
- No waiting period.
It’s important that you do your research before responding to an unsolicited refinance offer. Beware of aggressive or misleading advertising claims and sales tactics. Let’s break it down a bit further and see why these offers are too good to be true:
- Cashback: If a lender is promising a certain amount of cash back at loan closing, make sure you’re 100 percent clear on where that money is coming from. Sometimes, you’re simply getting your own money that’s being held in escrow and sometimes the lender is increasing the loan amount. Beware of making any real changes to your escrow account because it could come back to bite you.
- Low interest rates: Why VA loans can typically carry below-market interest rates, be wary of rates that are significantly below market. Also, many times when lenders advertise interest rate, those rates are not for a 30-year loan and you may have to pay discount points in order to receive that rate.
- Skipping payments: The ability to skip one or two monthly mortgage payments is sometimes used in VA home loan marketing campaigns. This is not the same as cash-back and, in fact, the VA prohibits lenders from using this tactic as a means of obtaining cash in IRRRL loans.
The more you know about your loan and the VA in general, the better equipped you will be to deal with these situations. For more information on your VA home loan, or discuss the proper ways to refinance your VA home loan, contact us today.