VA Home Loan Refinance: Refinancing your current mortgage on a VA loan can be a wise move if you are an active-duty member of the military, and you have an experienced or qualified spouse.
Fortunately, it is not difficult to meet the criteria for refinancing your mortgage on a VA loan, if you meet the requirements of military service and the criteria of the lender.
Table of Contents
Who is eligible for a VA mortgage refinancing?
Typically, you are eligible for a VA Home Loan Refinance for 90 days of active-duty military service during a designated conflict, six years of service in the National Guard or Reserve, or 181 consecutive days of active duty in peacetime.
You may also be eligible for a VA loan if you are married to a service member who died in the line of duty or as a result of a service-related disability. If you do not meet certain exceptions, you must be honorably discharged to qualify.
In addition to the additional VA requirements, a VA home loan requires a Certificate of Eligibility (COE) that proves your military service.
Generally, interest rate reduction refinancing loans or IRRRLs, which do not require underwriting, require a credit score of at least 620 to be approved for refinancing VA loans or VA loans.
Borrowers need to show adequate income to repay their loans, although it is generally easier to meet the approval guidelines than traditional mortgage loans.
Benefits of VA Home Loan Refinance?
The benefits of refinancing your mortgage with VA loans are many, which is why VA home loans are so popular among those who can qualify.
No down payment is required for VA loans, another government-backed loan requires at least 3.5 percent for FHA home loans. However, you must still be prepared to pay the cost of refinancing.
No Mortgage Insurance Required: For a VA home loan, the borrower does not need to pay mortgage insurance on top of the monthly mortgage payment, even without any down payment.
Minimum Advance Cost: VA loans typically charge a refund fee that the borrower pays in advance, which may be wrapped up with closing costs when you refinance. (If you choose this option, you’ll pay for these costs, so you’ll pay more in interest.) If you live with a service-related disability and meet certain requirements, or if you pay a fee, you Avoid Paying You are the living wife of an experienced soldier who died while on the job or as a result of disability as a result of military service.
Save on interest: VA home loan rates are generally competitive and often lower than you qualify for traditional refinancing.
Flexible Eligibility Criteria: Requirements for relaxed loans and VA loans make it easier to qualify. (Note: Eligibility guidelines for VA cash-out refinancing loans are more stringent).
There are no prepayment penalties: With a VA loan, like many other loans, you can repay your home early without having to worry about extra fees or “gotcha”.
How to refinance a VA loan –
When you want to refinance with a VA loan, you have two main options:
Interest rate reduction refinancing loan (IRRRL): Interest rate reduction refinancing loans, or IRRRLs, can be used to refinance an existing VA loan to a new VA loan with a lower interest rate. This loan is available without appraisal or any credit underwriting, and you can include all your closing costs in your new loan product. The funding fee for such a VA refinance loan may be less than the fee for applying for a VA loan to purchase the property.
This loan can be a smart choice if you qualify for a lower interest rate and if you want a lower monthly payment. Note, however, that if you refinance your current VA loan with IRRRL, you will not be able to cash out your equity.
VA cash-out refinancing
A VA cash-out refinance loan allows current homeowners to refinance their mortgage and take some or all of their earned equity. With this type of refinancing, veterans can get their hands on the cash they can use to pay off debts, improve a home, and more. If you are considering this option, set a clear goal for funding and be realistic about your habits. If you want to use cash to pay off a credit card, for example, you need to make sure that you never deposit a controllable balance again in the future.
This type of loan can be used to restructure an existing VA loan or a traditional mortgage, and the VA will guarantee the loan up to 100 percent of the value of the home. Like other VA loans, this loan requires you to meet military service requirements and have a Certificate of Qualification (COE).
If you currently have a VA home loan refinance a traditional mortgage and you want to refinance a VA loan with good rates and terms, use a VA loan calculator to find out how much your new mortgage payments might be. Compare rates and terms between multiple lenders because lenders ultimately determine the rate and terms of these loans, not the federal government.
A VA home loan refinance can help you save money with low-interest rates, limited closing costs, and no down payment required. If you already have a VA loan that you want to refinance, an IRRRL may allow you to switch to a new VA loan without any underwriting requirements.
You May Also Like: Jumbo Loan vs Conventional Loan