Va Loan Refinance
VA Refinance loans are backed by the U.S Department of Veterans Affairs and offer a lot of benefit to veterans looking to save money. This special loan program is designed specifically for women and men who are in active military service, service members, veterans, or surviving spouses. The objective of VA Refinance is simple; to improve veterans’ financial situation by refinancing into VA refinance rates which yields a lower rate in monthly payment or term, payoff high interest debt or cash out for home improvement. Since VA loans are backed up by the government, monthly mortgage rates are lower with VA housing loans than conventional home loans.
If you are eligible and qualify, the program allows for you to refinance VA loan or cash out up to 90% of the value of the home with no mortgage insurance. VA loan rates are typically lower than conventional mortgage rate. This means you save money and get a better rate VA loan. Once you understand the basic steps involved with getting refinanced with your loans, VA refinancing will make you realize what a simple and uncomplicated process it really is to lower monthly obligations by using your VA Refinance entitlement.
Types of VA Refinance Loans
There are 2 main types of VA loan refinancing. Like any other loans, it has its pros and cons.
VA Streamline Refinance (IRRRL)
The VA Streamline Refinance Program also known as “The VA Interest Rate Reduction Refinance Loan” (IRRRL) is designed to lower your interest rate by refinancing your existing VA loan. If you are currently in a VA loan and would like to lower interest rate by refinancing, the VA Refinance has made it easy for you. Since you already have a VA loan initially it’s a very simple and quick process to lower your monthly mortgage payments by taking advantage of this popular streamline VA refinance program. VA loans are available at low interest rates even to those who have low credit scores.
Mortgage Guide - 5 Simple Steps to Refinance Your Home
5 Simple Steps to Refinance Your Home
If you are planning to refinance this is a must read guide. It will walk you step-by-step through the process and let you know what to expect along the way.
See Guide
What are the Advantages of a Streamline?
You can’t get cash back with IRRRL, loan with Streamline refinances your current VA loans with another home loan but with lower interest rates along with these Streamline VA Refinance Pros:
You can switch from Adjustable Rate Mortgage to Fixed Rate Mortgage
Better refinance rates or loan rates
Lower monthly payment
No new certificate of eligibility (COE) required
No out of pocket money needed if you roll refinancing costs into the loan
Lower VA funding fee than VA cash out refinance
Fast turnaround time
No appraisal required
No income verification
No debt to income calculation
Streamlined paperwork process
Primary residence, investment or second home OK
What are the Requirements for a Streamline Refinancing my VA Home Loan ?
In order to be eligible for the IRRRL
You will have to already be in a VA loan
You have meet previous VA loan requirements
No late payments in the past year on current VA mortgage
Your new IRRRL must be lower than current one to qualify
Converting an ARM to a Fixed is allowed even if payment goes up
640 FICO/credit score or higher to qualify
VA does not set a minimum credit score but lenders who make the loans often require borrowers in the loan terms a minimum credit score for their VA home loan.
What is a VA Funding Fee and how much is it for a Streamline?
The VA funding fee is collected by lenders at closing and is financed into the loan which helps offset the cost to fund the VA streamline program. It’s a requirement on all VA loans except when the veteran has had a service-related disability in which case they can be exempt from paying this fee. The funding fee is .5% for a veteran and for National Guard or Reservist
What Documents are Required to Qualify for a VA loan Streamline Refinance?
A copy of your driver’s license, or government issued photo I.D.
A copy of your DD Form 214 release paper or Statement of Service if active military
A copy of your existing VA mortgage statement
A copy of the Declarations page from your Homeowner’s Insurance policy
Current VA Refinance Rates (VA Mortgage Rates) for Streamline Program (IRRRL)
VA streamline refinance rates:
2.990% (3.145% annual percentage rate APR) 30-year fixed rate term
2.500% interest rate (2.799% interest rate APR) for a 15 year fixed rate loan type.
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VA Cashout Refinance
The VA Cash Out Program is one of your refinance options. It is a great strategy to use your home equity to pay off high interest debt or simply cash out for personal use.
It’s one of the easiest ways to consolidate high interest debt, including credit cards under one low fixed monthly payments which may be tax deductible to help you save even more. You can also use it to refinance out of other types of mortgages like a conventional loan to get more favorable terms or even pay a second mortgage off with no mortgage insurance.
If you want to refinance your loan and get cash, VA cash out refinance is the best fit for you. You can cash out by refinancing your loan by getting a new larger amount of loan and paying your first mortgage, the difference will be the take home cash.
What are the Advantages of a VA loan Cash out Refinance?
Cash out gives borrowers more tangible leverage, here are some VA loan benefits from cash out refinancing:
Cash out up to 90% LTV (loan to value)
Payoff high interest debt
Can roll in all closing costs
Debt to income ratio up to 50%
No monthly mortgage insurance
What are the Requirements for a VA Cash out Mortgage Refinance?
Primary residence only
Minimum credit score 640
No late payments over 30 days in last 12 months
What About the VA Loan Funding Fee?
VA funding fee rates for veterans of active duty are as follows:
The funding fee for first time use is 2.3%
For second or subsequent use the funding fee is 3.6%
What’s Required for a loan VACash Out Refinance?
A copy of your driver’s license, or government issued photo I.D.
A copy of your W2’s for the past 2 years or complete tax returns if self employed
Your last 30 days’ worth of pay stubs, showing your current year-to-date gross income.
A copy of your DD Form 214 release paper or Statement of Service if active military
The “Note” from your mortgage loan
Awards letters showing any disability, pension, or Social Security monies you are receiving
A copy of the Declarations page from your Homeowner’s Insurance policy
VA Refinance Loans can be an incredible benefit for you and your family. Whether you’re looking to consolidate debt, take cash out for home improvements or other reasons, or get out of a bad loan and into one that’s backed by the Department of Veteran Affairs
Current VA Refinance Rates (Mortgage Rates) for VA Cash out Refinance
VA cash out refinance rate are as follows:
2.990% interest (3.284% interest rate APR) 30 year fixed rate term; and
2.500% (3.049% APR) interest rates for 15 year term.
How is the Process for VA Cash out Refinance?
Find a VA approved lender
Provide documents needed to your lender or loan officer for review
Get a Certificate of Eligibility (COE)
Have your home assessed and inspected by a VA-approved appraiser
Pay the VA funding fee (disabled applicants are exempt)
Close the loan
The VA approval process may take 40 to 50 days.
The U.S. Department of Veterans Affairs does not require lenders to establish an escrow fund, but places responsibility for the payment of taxes and insurance. Also, lenders may charge up to 1 percent of the loan amount for loan origination fee.
With a 15-year fixed rate or 20 year loan term, military officers may be able to pay off their VA loans as much as half the time they will take with 30 year fixed loan types. Though 30 years VA loan terms have slightly lower interest rates than the 30 year conventional loan rates, borrowers will end up costing much more in the interest over the life of your loan than its 15 years loan term counterpart.
A VA loan must not be applied against rental properties. Manufactured homes may also not be eligible for the 30 years VA loan rates mortgage payment. You cannot also use VA loans with FHA loans. Both FHA loan and VA loan are backed-up by the government. But, can’t be used together because both programs require the home to be your primary residence. FHA mortgage down payment has 3.5% rates, VA loans require no down payments. VA and FHA both offer streamline and cash out refinancing programs, with similar refinance rates.
Frequently Asked Questions:
Is it possible to defer two mortgage payments in my home refinance?
Yes, it’s possible to defer two monthly mortgage payments as part of your VA loan refinance.
There is little to no equity in my home, can I still refinance?
Yes, you can. A VA loan streamline will allow you to refinance without an appraisal or even if your home’s value is zero.
Will there be an income check to qualify?
No, the lender will only verify if you are still employed but will not verify actual income. That is why debt to income is not a factor in qualifying for a VA Streamline Refinance.
Do I need a Certificate of Eligibility for a VA loan Streamline?
Typically, this is not required since used the COE to qualify for the original VA mortgage
Will my VA loan amount increase by doing a Streamline?
If you choose to roll in your closing costs instead of paying for them, closing your loan will increase by this amount including the VA loan’s funding fee. A maximum of two discount points may be rolled into the loan. If you pay more than two discount points, the remainder must be paid in cash. But by deferring two mortgage payments, receiving an escrow refund, and the savings per month your breakeven on the streamline is typically realized quickly.
Can I subordinate a 2nd mortgage?
Yes, you are allowed to subordinate a 2nd mortgage and just pay off your current VA loan as long as the lien holder will allow it.
Is there a loan limit to how much I can cash out?
No, you can cash out up to the full 90% of the appraised value or can cash out less if you choose without penalty.