How do you refinance into a VA loan? What are existing VA refinance programs? Is it possible to refinance a non-VA loan into a VA loan?
The VA has an array of refinance programs for those who simply want to lower their rate or get cash out of their homes all at once. Refinancing other loans is also possible under the VA’s guidelines. Find out what these VA refinance programs are and what they can do for you.
VA Streamline Refinance
It’s officially known as the Interest Rate Reduction Refinance Loan. Under the program, VA mortgage borrowers are able to lower their existing
interest rates and decrease their monthly payment with lesser documentation and expedited processing.
There’s no need for a new appraisal on the home subject to the mortgage being refinanced. But the mortgage has to be current and a VA loan, of course.
Under the program, you can borrow up to 100% of your home’s value plus the funding fee. However, you can’t get cash out of the proceeds.
Aside from the rate, you can extend your loan term up to 25 years under the IRRRL. This makes the IRRRL a rate-and-term refinance.
The IRRRL does not necessarily require a credit check or underwriting for that matter. Still, expect the lender to review your credentials especially if you had
one late payment on your mortgage.
Find a loan that fits your financing needs.
VA Cash-out Refinance
Unlike the IRRRL, the VA’s cash-out refinance program is open to non-VA and VA homeowners. You can do a cash-out refinance to lower your rate and at the same time borrow against your home equity.
With a cash-out, your new loan amount is the sum of your existing loan balance plus the cash for home improvements, vacation, medical expenses, et cetera.
To ensure that your home has equity, the lender will order a new appraisal on the home. For its part, the VA can guarantee up to 100% of the value of the home.
Compared with the more relaxed guidelines of the IRRRL, you’ll have to undergo standard underwriting to get a cash-out: credit score, income, and debt-to-income ratio, as applicable.
Because of the larger amount you’ll borrow, the interest rate on the loan is higher than on a rate-and-term refinance like the IRRRL. In instances when the lender pays the closing costs on an IRRRL, the interest rate can be higher though.
Other VA Refinance Programs
The VA can also refinance construction loans, installment land sale contracts, and loans that were assumed by veterans at rates that were higher than on the proposed refinance loans.
Under these refinancing loans, you can borrow up to the original loan’s outstanding balance and allowable closing costs or the VA reasonable value and the funding fee, whichever is lesser. Energy efficiency improvements can also be financed into the loan.
The VA can guarantee up to $36,000 for the above refinance loans.
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