Welcome to our guide on Refinance Using VA Loan. If you are a veteran or an active military member, you might be familiar with the benefits of a VA loan. But, did you know that you can also refinance your mortgage using a VA loan? Refinancing can help lower your monthly payments, reduce your interest rate, or even get cash back. In this guide, we will explain everything you need to know about Refinance Using VA Loan, the benefits, requirements, and how it works.
What is a VA Loan?
A VA loan is a mortgage loan that is guaranteed by the United States Department of Veterans Affairs (VA) to eligible veterans or active military members. The VA loan program was created in 1944 to help veterans and active military members buy a home with no down payment and no private mortgage insurance (PMI). However, the VA loan program also offers options for refinance.
Who is Eligible for a VA Loan?
To be eligible for a VA loan, you must be a veteran, an active-duty military member, a National Guard or Reserve member, or a surviving spouse of a military member who died in the line of duty or due to a service-related disability. You must also meet certain service requirements, such as serving at least 90 consecutive days during wartime or 181 days during peacetime.
What are the Benefits of Refinancing Using VA Loan?
Refinancing using VA loan offers many benefits, such as:
Benefits |
Explanation |
|---|---|
No Down Payment |
Just like the VA loan for purchasing a home, you can refinance your mortgage with no down payment. |
No Private Mortgage Insurance (PMI) |
VA loans do not require PMI, which can save you hundreds or thousands of dollars over the life of your loan. |
Lower Interest Rate |
Refinancing can help reduce your interest rate, which can lower your monthly payments and save you money over the life of your loan. |
Cash Back |
You can refinance your mortgage and get cash back, which can be used to pay off debt, make home improvements, or cover other expenses. |
How Does Refinancing Using VA Loan Work?
Refinancing using VA loan works by replacing your existing mortgage with a new one that is guaranteed by the VA. You can refinance your mortgage using one of the following options:
VA Streamline Refinance
A VA Streamline Refinance, also known as an Interest Rate Reduction Refinance Loan (IRRRL), is a simplified refinance option that allows you to lower your interest rate without going through a full underwriting process. You do not need an appraisal or income verification, and you can roll the closing costs into the new loan balance. To be eligible for a VA Streamline Refinance, you must have an existing VA loan and meet certain requirements.
Cash-Out Refinance
A Cash-Out Refinance allows you to refinance your mortgage for more than you owe and get cash back. You can use the cash to pay off debt, make home improvements, or cover other expenses. To be eligible for a Cash-Out Refinance, you must have sufficient equity in your home and meet certain requirements.
Requirements for Refinancing Using VA Loan
To refinance your mortgage using a VA loan, you must meet the following requirements:
Occupancy
You must certify that you or your spouse intend to occupy the property as your home. VA loans are not available for investment properties or second homes.
Income and Credit
You must have a stable income and meet the minimum credit score requirements set by the lender. Most lenders require a credit score of at least 620 for a VA loan.
Property Eligibility
The property you are refinancing must be eligible for a VA loan. The VA has specific requirements for the type of property, such as it must be a single-family home, condo, or townhome, and it must be in good condition.
VA Funding Fee
You must pay a VA funding fee, which is a one-time fee that helps the VA cover the costs of the loan program. The amount of the funding fee depends on the type of loan, your down payment, and whether it is your first VA loan or a subsequent loan.
Other Requirements
Other requirements may apply, depending on the lender and the type of refinance you choose. For example, if you choose a Cash-Out Refinance, you may have additional requirements, such as a debt-to-income ratio limit.
FAQs About Refinance Using VA Loan
1. Can I Refinance Using VA Loan If I Have A Conventional Loan?
Yes, you can refinance your conventional loan using a VA loan as long as you meet the eligibility requirements.
2. Is There A Monthly Mortgage Insurance Premium For Refinancing Using VA Loan?
No, VA loans do not require monthly mortgage insurance premium, which is one of the benefits of the program.
3. How Much Equity Do I Need To Refinance Using VA Loan?
The amount of equity you need to refinance using VA loan depends on the type of refinance you choose. For a Cash-Out refinance, you must have sufficient equity in your home.
4. How Long Does It Take To Refinance Using VA Loan?
The time it takes to refinance using VA loan depends on the lender, the type of refinance you choose, and how quickly you provide the necessary documents. A VA Streamline Refinance can be completed in as little as 10 days, while a Cash-Out Refinance may take longer.
5. Can I Refinance Using VA Loan If I Have A Low Credit Score?
If your credit score is below the minimum requirement set by the lender, you may not be eligible for a VA loan. However, some lenders offer VA loans for borrowers with lower credit scores.
6. Can I Get Cash Back When I Refinance Using VA Loan?
Yes, you can get cash back when you refinance using VA loan with a Cash-Out Refinance option. The amount of cash you can get depends on the equity in your home and the loan amount.
7. Can I Refinance Using VA Loan More Than Once?
Yes, you can refinance using VA loan more than once, as long as you meet the eligibility requirements and have sufficient equity in your home.
8. How Much Can I Save By Refinancing Using VA Loan?
The amount you can save by refinancing using VA loan depends on several factors, such as your current interest rate, the new interest rate, the loan term, and the closing costs. Typically, you can save thousands of dollars over the life of your loan by refinancing.
9. Is It Worth Refinancing Using VA Loan?
It depends on your unique situation. Refinancing using VA loan can be beneficial if it helps you save money, lower your monthly payments, or get cash back for necessary expenses. However, it may not be worth it if you plan to sell your home soon or if the closing costs are too high.
10. How Do I Qualify For A VA Loan?
To qualify for a VA loan, you must meet the eligibility requirements set by the VA, including service requirements and credit score requirements. You must also have a Certificate of Eligibility (COE) from the VA.
11. Can I Choose Any Lender For Refinancing Using VA Loan?
Yes, you can choose any lender that offers VA loans. However, it is important to compare rates, fees, and terms from different lenders to find the best option for you.
12. Do I Need An Appraisal For Refinancing Using VA Loan?
For a VA Streamline Refinance, you do not need an appraisal. However, for a Cash-Out Refinance, you may need an appraisal to determine the value of your home.
13. What Happens If I Can’t Make Payments On My VA Loan?
If you can’t make payments on your VA loan, you may be at risk of foreclosure. It is important to contact your lender immediately if you are having financial difficulties to discuss your options and avoid foreclosure.
Conclusion
Refinancing using VA loan can be a great option for veterans and active military members who want to lower their mortgage payments, reduce their interest rates, or get cash back. In this guide, we have explained everything you need to know about Refinance Using VA Loan, including the benefits, requirements, and how it works. If you are considering refinancing, make sure to compare rates, fees, and terms from different lenders to find the best option for you.
Thank you for reading our guide on Refinance Using VA Loan. We hope this guide has been informative and helpful. If you have any questions or comments, please feel free to contact us.
Disclaimer
The information in this guide is for educational purposes only and is not intended to provide legal, financial, or tax advice. We recommend that you consult with a professional advisor before making any decisions regarding Refinance Using VA Loan. We do not endorse or recommend any specific lender or loan product.