Do you have a VA jumbo loan that you want to refinance? You might think you are stuck with your loan because you don’t have enough equity. Just like when you purchased the home with VA financing, though, you don’t need any equity in the home to refinance.
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Get Your Credit Ready
Your credit score can make or break your chances of securing approval for the VA refinance. Generally, the VA doesn’t have a
minimum credit score requirement. Even for a refinance, the lender can decide what credit score they consider acceptable. On average, you can expect a minimum 640 credit score requirement in order to refinance your VA jumbo loan.
How do you know if you have at least a 640 credit score? There are a few ways. First, you can sign up for the credit monitoring programs that many banks and/or credit card companies offer today. Check with any of the banks where you hold accounts or credit card companies that you use. They may offer direct (and free) access to your credit score. You should be able to check your score monthly to see how close you are to the 640 requirement.
Next, pull your free credit report from one or all three of the credit bureaus. We suggest pulling one report at a time, spreading out when you pull them by 4 months. This way you have access to your credit history almost year-round. This report will give you detailed information on what your lenders and creditors report about you. This history is what potential VA lenders look at when they decide to let you refinance or not.
Take the time to review these reports and make the necessary changes, such as paying your debts down, bringing your accounts current, or taking care of outstanding collections.
Make Sure Your Other Qualifying Factors are in Order
Just as when you purchased your home, your lender will need to look at your income and debts. They need to know that you make enough money to cover your debts and have money left over at the end of the month. Your
disposal income, or money left over after you pay your bills, is what lenders look at the most. The VA has strict rules regarding how much money you must have left each month. They base the amount on your family size and location. They do this to make sure you have enough money for the daily cost of living without having to sacrifice.
The lender will need proof of your last two years of income as well as proof of your current debts. If you are self-employed, be prepared to provide lenders with your tax returns for the last two years. This allows the lender to see what expenses you have as a result of running your own business. Keep in mind that lenders must use your adjusted gross income reported on your tax returns for qualifying purposes.
Choose the Type of Refinance
Once you know you have at least a 640 credit score with a decent history, you need to determine what type of refinance, you need.
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Do you want to save money every month? Maybe rates have come down since you bought your house and you want to take advantage of them. The more money you borrowed, the more you might save with a lower interest rate.
Maybe rather than the lower interest rate, you want to shorten your term. Are things better now than when you bought the home? In other words, are you or your spouse making more money, making it easier to afford the higher payment? The less time you borrow the money, the less interest you’ll pay. As a bonus, shorter terms usually have lower interest rates too.
Lastly, maybe you need to take cash out of your home’s equity. The VA loan is one of the only programs that allows you to borrow as much as 90% to 100% of your home’s value. How much you can borrow will vary by lender. Some lenders are okay with the 100% LTV, while others prefer to be a bit more cautious. With the cash-out refinance, you probably won’t get a lower interest rate; your rate may even increase.
Apply for the VA Jumbo Refinance
Once you have everything in order, it’s time to apply for the VA jumbo refinance. It’s best if you apply with several lenders. Two or three lenders will suffice, but you can apply with as many as you see fit. This way you can
compare the rates and costs of each loan.
Because the VA doesn’t fund the loans, the lender can add their own rules onto what the VA requires. This may mean that some lenders will have lenient guidelines while others will have stricter rules. Keep shopping for a lender until you find the one that suits your needs the most, giving you the best results with the refinance.
Refinancing your VA jumbo loan isn’t as hard as it may look. There are many VA lenders out there willing to refinance your loan. Work on getting your qualifying factors in line before applying for the loan and you should have your choice of lenders.
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