Refinancing Your Home with a VA Loan: What You Need to Know
Welcome to our guide on how to refinance your home with a VA loan. If you’re a veteran or active-duty member of the military, you may be eligible for a VA loan to refinance your home. A VA loan is a mortgage program for veterans and service members that’s guaranteed by the Department of Veterans Affairs (VA). In this guide, we’ll explain everything you need to know about VA loans for refinancing, including eligibility requirements, benefits, and the application process.
What is a VA Loan Refinance?
A VA loan refinance is a mortgage refinancing option that’s available to veterans and service members who have an existing VA loan. A VA refinance allows you to replace your current VA loan with a new one with different terms, such as lower interest rates, shorter repayment periods, or a cash-out option. VA loan refinancing can help veterans and service members save money on their monthly mortgage payments or access cash to pay off debts, make home improvements, or cover other expenses.
Eligibility Requirements for VA Loan Refinancing
In order to refinance your home with a VA loan, you must meet the eligibility requirements set by the Department of Veterans Affairs. Here are the basic requirements:
VA Loan Eligibility
You must have a current VA loan or have paid off a VA loan in the past.
You must have a minimum credit score of 620.
You must have previously occupied the home you’re refinancing.
VA Funding Fee
You’ll need to pay a VA funding fee, which is a one-time cost calculated based on the loan amount, type of service, and down payment.
If you meet these requirements, you can apply for a VA loan refinance through a VA-approved lender.
Benefits of Refinancing with a VA Loan
There are several benefits to refinancing your home with a VA loan:
- Lower Interest Rates: VA loans typically have lower interest rates than conventional loans, which can save you money on your monthly mortgage payments.
- No Required Down Payment: VA loans don’t require a down payment, so you can refinance your home without having to put any money down.
- No Private Mortgage Insurance: Because VA loans are backed by the government, they don’t require private mortgage insurance (PMI) like conventional loans do.
- Cash-Out Option: You can refinance your home with a VA cash-out refinance loan and access the equity in your home to pay off debts, make home improvements, or cover other expenses.
- Flexible Repayment Terms: VA loans offer flexible repayment terms, including fixed-rate and adjustable-rate options.
How to Apply for a VA Loan Refinance
To apply for a VA loan refinance, you’ll need to follow these steps:
- Contact a VA-approved lender: Find a lender that participates in the VA Home Loan program.
- Apply for a Certificate of Eligibility (COE): You’ll need a COE to prove your eligibility for a VA loan refinance.
- Provide documentation: Your lender will ask for documentation to verify your income, employment, and other financial information.
- Wait for the appraisal: Your lender will order an appraisal of your home to determine its current value.
- Close the loan: Once your lender approves your loan, you’ll sign the final paperwork and close the loan.
FAQs About VA Loan Refinancing
Q: How much can I borrow with a VA loan refinance?
A: The maximum amount you can borrow with a VA loan refinance is the appraised value of your home, minus any outstanding mortgages and liens. The VA has set a limit on the amount of the loan based on the county where the home is located.
Q: How long does it take to refinance with a VA loan?
A: The time it takes to refinance with a VA loan varies depending on the lender, but it typically takes between 30 and 45 days.
Q: Can I refinance my home if it’s not a VA loan?
A: Yes, you can refinance your home with a conventional loan or another type of mortgage if it’s not a VA loan. However, you won’t be eligible for the benefits of a VA loan refinance.
Q: Can I refinance my home if I’m behind on my mortgage payments?
A: You may be able to refinance your home with a VA loan if you’re behind on your mortgage payments, but it depends on your lender’s policies.
Q: Can I refinance my home if I have a second mortgage?
A: Yes, you can refinance your home with a VA loan if you have a second mortgage, but the second mortgage holder must agree to subordinate their lien to the new VA loan.
Q: Can I refinance my home if it’s worth less than I owe on it?
A: You may be able to refinance your home with a VA loan if it’s worth less than you owe on it, but it depends on your lender’s policies and the amount of equity you have in the home.
Q: What is the VA funding fee?
A: The VA funding fee is a one-time cost that’s required for all VA loans, including refinances. The fee is a percentage of the loan amount and varies based on the type of service, down payment, and loan amount.
Q: Can I roll the VA funding fee into my loan?
A: Yes, you can roll the VA funding fee into your loan, but it will increase the amount of your monthly mortgage payment.
Q: Can I choose my own appraiser for the VA loan refinance?
A: No, the VA requires that the lender choose an approved appraiser to determine the value of the home.
Q: Can I refinance my home multiple times with a VA loan?
A: Yes, you can refinance your home multiple times with a VA loan, as long as you meet the VA’s eligibility requirements.
Q: Can I refinance my home if I’m in the process of a divorce?
A: You may be able to refinance your home if you’re in the process of a divorce, but it depends on your lender’s policies and the terms of your divorce agreement.
Q: Can I refinance my home if I have a low credit score?
A: VA loan refinancing requires a minimum credit score of 620, but individual lenders may have their own credit score requirements.
Q: Can I refinance my home if I have a disability rating?
A: Yes, you can refinance your home with a VA loan if you have a disability rating, and you may be eligible for additional benefits, such as a waiver of the VA funding fee.
Q: What happens if I can’t make my VA loan refinance payments?
A: If you’re unable to make your VA loan refinance payments, you should contact your lender immediately to discuss your options. Depending on your situation, you may be eligible for a forbearance, loan modification, or other assistance.
If you’re a veteran or service member who owns a home, a VA loan refinance may be an excellent option for you to save money on your monthly mortgage payments or access cash to pay off debts or make home improvements. By following the steps outlined in this guide and working with a VA-approved lender, you can take advantage of the benefits of VA loan refinancing and achieve your financial goals.
Thank you for reading our guide on how to refinance your home with a VA loan. We hope you found it helpful and informative. If you have any questions or comments, please feel free to reach out to us.
The information in this article is for educational purposes only and does not constitute financial or legal advice. We recommend that you consult with a qualified financial and/or legal professional before making any financial decisions.