Are you a veteran or someone currently serving in the military and looking to refinance your VA loan into a conventional one? Well, you’ve come to the right place. In this article, we’ll explain everything you need to know about how to refinance VA loan to conventional, including why you might want to do so, what the process entails, and frequently asked questions. So, let’s dive in!
Opening: Understanding VA Loans and Conventional Loans
Before we delve into the ins and outs of refinancing your VA loan into a conventional one, let’s first understand what each loan type entails.
VA loans are backed by the VA and are available to eligible veterans, active-duty military members, and surviving spouses. They offer a range of benefits, including no down payment or mortgage insurance required, more relaxed credit score requirements, and competitive interest rates.
On the other hand, conventional loans are not backed by the VA and are available to anyone. They typically require a down payment, private mortgage insurance if the down payment is less than 20%, and stricter credit score requirements. However, they often come with lower interest rates and more flexible terms.
Now that we have a basic understanding of each loan type, let’s move on to the main topic – refinancing VA loans to conventional.
Why Refinance VA Loan to Conventional?
There are several reasons why someone might want to refinance their VA loan into a conventional one. Here are just a few:
Lower Interest Rates
While VA loans typically come with competitive interest rates, refinancing to a conventional loan can sometimes result in even lower rates. This could result in significant savings over the life of the loan.
Eliminate Mortgage Insurance
VA loans don’t require private mortgage insurance, but they do require a funding fee. Refinancing to a conventional loan could eliminate the funding fee and private mortgage insurance requirements, resulting in lower monthly payments.
Cash Out Equity
If you have built up equity in your home and need cash for other expenses, refinancing to a conventional loan could allow you to cash out some of that equity.
Now that we know why someone might want to refinance their VA loan to conventional, let’s explore the process in more detail.
Refinancing VA Loan to Conventional: The Process
Refinancing your VA loan to a conventional one involves several steps:
Step 1: Determine Your Eligibility
Before you can refinance your VA loan to conventional, you must first ensure that you meet the eligibility requirements. This typically includes having a credit score of at least 620 and enough equity in your home to meet the lender’s requirements.
Step 2: Shop Around for Lenders
Once you have determined your eligibility, it’s time to shop around for lenders. Look for lenders who offer conventional loans and compare their rates, fees, and terms.
Step 3: Apply for the Loan
After you have found a lender you like, it’s time to apply for the loan. You’ll need to provide documentation such as proof of income, employment, and assets.
Step 4: Get an Appraisal
The lender will require an appraisal of your home to determine its current value. This is necessary to determine how much equity you have in your home.
Step 5: Close the Loan
If your loan application is approved, it’s time to close the loan. This typically involves signing a lot of paperwork and paying closing costs.
FAQs: Refinance VA Loan to Conventional
Question |
Answer |
|---|---|
1. Can I refinance my VA loan to conventional? |
Yes, you can. You will need to meet the lender’s eligibility requirements and follow the refinancing process. |
2. How long does the refinancing process take? |
The refinancing process can take anywhere from 30 to 45 days. |
3. Will I need to provide documentation during the refinancing process? |
Yes, you will need to provide documentation such as proof of income, employment, and assets. |
4. Can I cash out equity when refinancing to a conventional loan? |
Yes, if you have built up equity in your home, you can cash it out when refinancing to a conventional loan. |
5. Is refinancing to a conventional loan a good idea? |
It depends on your individual financial situation. Refinancing to a conventional loan may result in lower interest rates and monthly payments, but it’s important to weigh the potential costs and benefits. |
6. Will refinancing my VA loan to conventional affect my credit score? |
Refinancing your VA loan to conventional may result in a temporary dip in your credit score, but it should rebound over time. |
7. What are the closing costs associated with refinancing to a conventional loan? |
Closing costs can vary, but they typically range from 2% to 5% of the loan amount. |
8. Can I refinance to a conventional loan if I have bad credit? |
It may be more difficult to refinance to a conventional loan if you have bad credit, but it’s not impossible. You may need to shop around for lenders who specialize in bad credit loans. |
9. Can I refinance to a conventional loan if I have a low income? |
It may be more difficult to refinance to a conventional loan if you have a low income, but it’s not impossible. You may need to shop around for lenders who offer low-income loans. |
10. What is the difference between a VA and conventional loan? |
VA loans are backed by the VA and are available to eligible veterans, active-duty military members, and surviving spouses. They offer a range of benefits, including no down payment or mortgage insurance required, more relaxed credit score requirements, and competitive interest rates. Conventional loans are not backed by the VA and are available to anyone. They typically require a down payment, private mortgage insurance if the down payment is less than 20%, and stricter credit score requirements. However, they often come with lower interest rates and more flexible terms. |
11. Can I refinance my VA loan to a fixed-rate conventional loan? |
Yes, you can. A fixed-rate conventional loan may offer you more stability and predictability in your monthly payments. |
12. Can I refinance my VA loan to an adjustable-rate conventional loan? |
Yes, you can. An adjustable-rate conventional loan may offer you lower initial interest rates, but keep in mind that the rates can fluctuate over time. |
13. Should I refinance my VA loan to a conventional loan? |
Whether or not you should refinance your VA loan to a conventional loan depends on your individual financial situation. It’s important to weigh the potential costs and benefits and consult with a financial advisor or lender. |
Conclusion: Take Action Today
Now that you know the ins and outs of refinancing your VA loan to a conventional one, it’s time to take action. If you’re interested in refinancing, start by checking your eligibility and shopping around for lenders. Be sure to weigh the potential costs and benefits and consult with a financial advisor or lender if you’re unsure.
At the end of the day, refinancing your VA loan to a conventional one could result in significant savings over the life of the loan, lower monthly payments, and more flexible terms. So, take action today and see if refinancing is right for you.
Closing Disclaimer
The information provided in this article is for informational purposes only and should not be construed as legal, financial, or other professional advice. We recommend consulting with a financial advisor or lender before making any decisions regarding refinancing your VA loan to a conventional one.