Are you looking for an inexpensive way to refinance your mortgage? Even if you don’t have a VA loan right now, you may still be able to use your VA benefit to refinance your mortgage.
Click to See the Latest VA Refinance Rates.
The VA offers two refinance options – the cash-out refinance and the streamline refinance. Both options provide you with the VA guarantee, flexible underwriting guidelines, and limited closing costs.
The VA Cash-Out Refinance
The VA cash-out refinance is for anyone who meets the following:
- You have a current VA loan but you want to tap into your home’s equity
- You have something other than a VA loan and want to take advantage of your VA benefits
The cash-out refinance applies to you even if you aren’t taking cash out of your home’s equity if you have any other type of loan. There’s one simple reason for this – the streamline loan means you already processed a loan with the VA. With this information on file, a new VA lender can rely on your ability to qualify for the loan based on those factors. If you don’t currently have a VA loan, the VA doesn’t know how well you qualify. You will need to fully verify your ability to get the loan.
In order to qualify for the VA cash-out refinance, you’ll need:
- Minimum credit score of 620 (this varies by lender, some require higher and some allow lower)
- Max total debt ratio of 43%
- Enough monthly disposable income to meet the requirements for your family size and location
- No defaulted federal loans
- VA entitlement
The VA allows you to borrow up to 100% of your home’s value based on a current appraisal. Some lenders don’t allow such a high LTV. If you need 100% of your home’s value, you may have to shop around to find a willing lender.
The VA Streamline Refinance
The VA streamline refinance is only for veterans that already have a VA loan. The VA calls it the Interest Rate Reduction Refinance loan. As the name suggests, the loan is to help you lower your interest rate and/or your monthly payment.
Check today’s VA loan rates.
In order to qualify for the VA cash out refinance, you must have the loan for a minimum of 12 months. Within that 12 months, you should not have any late payments on your VA loan. This is the main qualifying factor for your VA streamline refinance, so mostlenders follow this rule carefully. Some lenders may allow one 30-day late payment to slip by if you are otherwise a good risk. If you’ve had the loan for less than 12 months, though, no lender will be able to grant you an exception for any late payments.
You must also prove that there is a net tangible benefit of refinancing. Typically, this means a lower monthly payment. The VA doesn’t specify how much you must save, though. As long as the payment is lower, a VA-approved lender may allow it.
But, a lower payment isn’t the only net tangible benefit you can have. If you refinance from a fixed rate loan to another fixed rate loan, then yes, you need a lower payment. If you refinance from an ARM to a fixed rate loan, though, you may not have a lower payment. In fact, your rate may even increase. In this case, the lender may approve your loan based on the fact that you are decreasing the riskiness of your loan by choosing a fixed rate loan.
The one thing that both the VA cash-out refinance and VA streamline refinance have in common is the need to have VA entitlement. In other words, you must be eligible for VA benefits. If you’ve never used your benefit, you need to get a copy of your Certificate of Entitlement. If you are using the streamline program because you already have a VA loan, though, you won’t need to re-verify your entitlement.
A VA loan can help you secure a decent interest rate for little closing costs and allow you to borrow up to 100% of the home’s value. It’s a great way to save money on your mortgage or tap into your home’s equity for little cost.
Determine your eligibility and get started.