Refinancing your mortgage can be a game-changer when it comes to saving money on interest payments or accessing the equity in your home. If you’re a veteran or a service member, there’s another option that might be perfect for you – a VA refinance loan. In this article, we’ll explore three different ways you can refinance your home loan using a VA loan.
The IRRRL, or Streamline Refinance
The Interest Rate Reduction Refinance Loan (IRRRL), also known as the VA streamline, is an excellent option for veterans looking to refinance their mortgage. This type of refinance requires less paperwork compared to other VA loans. With the IRRRL, you can switch to a lower interest rate, save on costs, and avoid the hassle of extensive paperwork.
One of the major advantages of the VA streamline is that it doesn’t require documentation of income. Unlike traditional loans, you won’t need to provide paycheck stubs, W2 forms, or tax returns. Additionally, there’s no need to verify employment. The VA does not require a credit report either, as long as you haven’t had more than one payment more than 30 days past due in the last 12 months. However, lenders may have specific requirements, but the VA guidelines only focus on your mortgage payment history from the previous year.
The VA streamline doesn’t require an appraisal either. All you need is a completed loan application and minimal documentation. To be eligible, you must aim for a lower payment or refinance from an adjustable rate mortgage to a fixed rate loan. Keep in mind that the streamline can only refinance from one VA loan to another – it can’t refinance a conventional or FHA loan. Plus, no cash-out is allowed during the streamline process.
If you’re a veteran looking for extra cash, a VA cash-out refinance might be the perfect solution. With this type of refinance, you can replace your current loan with a new VA loan and access the equity in your home. Unlike the VA streamline, a cash-out refinance requires full documentation.
To determine the amount of cash you can receive, the VA lender will evaluate the current appraised value of your property. In most cases, the lender will allow you to borrow up to 90 percent of the appraised value (80 percent in Texas). For example, if your appraised value is $150,000, you may be eligible for a cash-out loan of up to $135,000, depending on your current loan balance.
Conventional to VA Refinance
While a VA streamline refinance is limited to VA to VA transactions, a VA loan can also refinance other existing loan types, including FHA and conventional mortgages. This option is particularly beneficial if you’re concerned about current property values.
With a conventional refinance, you can typically refinance up to 90 percent of the current value of your property. However, if your appraisal falls short of the required value, you won’t be able to proceed with a conventional loan refinance. In such cases, refinancing into a VA loan is a viable alternative.
A standard VA refinance without cash-out allows you to borrow up to 100 percent of your home’s value. For example, if your property appraises at $205,000, you can refinance your conventional mortgage into a VA loan.
If the interest rate of the VA loan is lower than your existing conventional or FHA loan, it might make sense to refinance into a new VA mortgage.
Take the Next Step
If you’re considering refinancing your mortgage with a VA loan, it’s essential to take the next step and reach out to a VA lender. They can guide you through the process and help you determine which option works best for you.
Remember, refinancing your mortgage is a big decision, and running a few numbers can make all the difference. So, don’t hesitate to contact a VA lender and speak with one of their loan officers. They’ll be able to provide you with the information you need to make an informed choice.
To learn more about VA loans and explore your options, visit ATICE.INFO. Grant Moon, the author of an upcoming VA loan guide, can provide you with invaluable insights into the VA loan process.