What is a VA refinance?
The VA refinance comes in two different varieties, the Interest Rate Reduction Refinance Loan, or IRRRL, is one of the simplest of all mortgage loans available, and the “cash out” refinance. Offered to veterans who are currently in a VA loan, the VA refinance allows borrowers to lower their monthly payments and the interest rate of their mortgage without many of the requirements of a traditional refinance. with a streamline There is no need for an appraisal, and some lenders do not even require a credit score. With a “Cash out” these are still generally requirements. Because of the decrease in requirements a streamline VA refinance can often close much faster, sometimes as little as 3-4 weeks.
What are the benefits of a VA refinance?
The VA refinance programs are government backed mortgage loans for active duty and prior service veterans. A VA refinance is without a doubt the best mortgage refinance loan on the market. Absolutely no other refinance loan program is as simple and easy to qualify for. The IRRRL provides you a fast, simple and hassle free way to refinance your current VA home loan so that you can take advantage of lower interest rates. While a VA cash out allows borrowers to take out money to pay down debt and make improvements to the home. Credit qualifying with some lenders is not required for the IRRRL. This means that even if you have bad credit, as long as you have not had more than 1 thirty day late mortgage payment in the last 12 months, you may still be eligible for a streamline VA refinance. What could be easier! And to add icing on the cake, VA even allows you to rollover $6000 into the loan amount for energy efficient improvements to your home with a VA refinance.
Just to recap the features of a streamline VA refinance:
- With some lenders credit qualifying is not required, however, your existing mortgage must be current and you cannot have had more than one 30-day late mortgage payment within the last 12 months.
- No employment verification is required for a VA refinance
- forgo up to 2 mortgage payments by using a VA refinance
- No appraisal is required for a streamline VA refinance
- A streamline VA refinance lets you refinance your existing VA home loan with no out of pocket expenses. All closing cost and pre-paid items can be rolled into the loan amount.
- No Income documentation is required for a VA refinance
- Get existing escrow account refunded back to you
- Fast, convenient in-home closings. Most VA refinances are closed in your home around your busy schedule.
- Your current mortgage loan must be a VA home loan in order to do a VA refinance.
- With the streamline VA refinance up to $6000 in can be included in the loan amount for energy efficient improvements to the home.
When can I use a VA refinance?
For a “cash out” transaction the borrower can be reusing their VA eligibility on the home previously financed through the VA, or simply switching from a conventional to a VA loan. A streamline VA refinance can be completed by a VA-approved lender only if a VA borrower has already used his or her eligibility for a VA loan on the property intended for refinance. In other words, it must be a VA to VA refinance, and the VA borrower’s entitlement will be “reused” for the VA refinance. If reusing eligibility, though the borrower need not obtain another Certificate of Eligibility, he or she will most likely be required to show the lender the Certificate used on the first VA loan to prove how much entitlement was used; therefore, the lender will know how much entitlement will be reused for the VA refinance. In some cases, entitlement may have been substituted for that of the seller if the VA loan was assumed. In any case, it’s good to have the original Certificate of Eligibility to show how much entitlement the borrower will be reusing.
Do I have to live in the home I am refinancing?
VA loans require borrower occupancy when they are made. The occupancy requirement for VA refinance is different from loan to loan. With an IRRRL the borrower need only certify that he or she previously occupied it. When the borrower originally acquired the VA loan for the property being considered for the VA refinance, he or she certified that it would be borrower occupied. For a “cash out” VA refinance, the same rules apply.
Will I have to bring any money to closing?
No. A streamline VA refinance loan may exceed the sum of the outstanding balance on the existing VA loan. A “cash out” refinance is obviously sending the borrower home with money in pocket, as such in most cases the need not bring cash to closing. The VA funding fee and closing costs may also be rolled into the loan, as well as any other allowable fees and up to two discount points.
So how much will I be rolling into my loan?
If you choose to roll in all the costs, along with any “cash out”, into a VA refinance it can raise the balance significantly. Items that you can roll into a VA refinance are: the VA funding fee, Discount points, Origination charges, title fees, and Escrow prepaids. Origination charges are the commissions paid to the loan officer for originating the VA refinance. The VA funding fee is charged on all VA refinances at a cost of 0.5% of the loan amount for an IRRRL and 3.3% on a “cash out” refinance. Prepaid escrows are the funds required to bring your new escrow account current. This insures that when the property taxes are due that the funds will be readily available. Discount points are paid to the lender to purchase a lower interest rate. Title fees are charged by the title company for title insurance and other fees associated with the legal recording of the mortgage.
