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Refinance VA Loan

How do I find the right loan, if I am looking to refinance my VA loan?

I've owned a home for two years. APR is approximately 6.5% I have a VA mortgage. I would like to refinance and possibly get a lower monthly payment. I'm not sure I can refinance having a VA mortgage

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Highlights

  • Learn about the options to refinance VA loan.
  • Understand the potential dangers of refinancing a VA loan.
  • Find the right VA loan refinance for you.

yes, you can refinance your va loan.

va loans are loans that are guaranteed by the us government, through the u.s. department of veterans affairs (va). the va does not loan the money directly. you get your va loan through a lender that is approved to make va loans.

cash-out or rate and term

when you shop around for your va refinance loan, be aware that there are different types of va loan refinance options available. you can apply for a cash-out va loan or you can apply for a loan that only adjusts your interest rate and the term of the loan. both of these types of loans are only available for refinancing a loan that was originally a va loan to a new va loan.

as your question states a desire for a lower payment, i will focus on the rate and term refi option for a va mortgage.

va streamline refinancing or irrrl

the va has a program that makes it easy to apply for a rate and term refinance. it is called a va streamline refinance, a va to va loan, or, in the va's terminology, an irrrl (interest rate reduction refinancing loan). only the original va loan can be paid off in a streamlined refinance. no second mortgage that has been taken on the property can be included in the loan.

less paperwork

irrrls often require very little paperwork, so they frequently can be closed quickly. the va does not require any appraisal of the property or any analysis of the borrower's credit worthiness. it i s possible that your lender will want an appraisal or to review the credit, even though the va doesn't require it.

interest rate must drop

if you wish to refinance a fixed-interest-rate va loan, your new loan must decrease your interest rate. if you are refinancing a va guaranteed adjustable-rate mortgage (arm), it is permissible for the interest rate to increase.

shop around

irrrls are available from any lender that chooses to participate in the program. the va itself cautions borrowers to be wary of any organization that claims that it is the authorized provider for irrrls.

the va also recommends borrowers shop around, as the interest rate and closing costs can vary significantly from lender to lender. almost all costs of the loan come from the lender. as the va makes clear, the only cost they require is a funding fee of one-half of one percent of the loan amount. this cost can be paid by the borrower or in cash or included in the loan.

eligibility

irrrls re-use the certificate of eligibility that you obtained to get your first va loan. while you needed to be an occupant of the property when you originally took out your va loan and obtained the va certificate of eligibility, you can obtain an irrrl when you are no longer living in the home.

loan size and costs

the loan you apply for cannot be more than the payoff balance on your current va loan plus the closing costs of your loan. closing costs may include fees the lender charges to fund the loan and up to two discount points. (each loan discount point generally costs 1% of the total loan amount. paying this fee will lower your interest rate, usually by .125% or .25%. you can claim a discount points as a tax deduction, but only for the year in which they were paid.) an irrrl also allows you to borrow some additional money to fund energy efficiency improvements. these costs, too, can be rolled into the loan.

the costs of the loan, discount points (if selected), and energy improvements will increase the size of your loan. it could result in a situation where you owe more than the house is worth, making selling for enough to pay off your loan a big problem.

15 or 30? which term is right for you?

some lenders steer borrowers to shorten the term of the loan, say from a 30-year loan to a 15-year loan. while a shorter loan will lead to overall lower interest costs over the course of the loan, it could raise the payment so high that the borrower cannot afford the payment. be very careful that you do not set yourself up for an unaffordable payment.

va cash-out loans

in a separate category from irrrls, there are also va cash-out loans. va cash-out loans are available that allow you to borrow from the equity in your property, to consolidate debt, pay for home improvements, or use money for some other personal need.

to be eligible for a va a cash-out loan, you have to be a resident of the property and the property must be your principal residence. the loan has to use the same borrower(s) as the original loan.

va cash-out loans allow for refinancing up to 90% of the appraised market value of the home, unless a state's restrictions allow only a lower limit, plus the closing costs for the loan.

recommendation

i recommend that you start shopping around for the best streamlined refinancing loan that you can find. start by visiting the bills.com refinance savings center to get no-cost quotes from mortgage refinance providers.

keep in mind you can contact the u.s. department of veterans affairs directly, asking questions or seeking information at the official va web site or you can speak with someone at the va.

i hope this information helps you find. learn & save.

best,

bill

bills.com

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11 Comments

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  • MM
    Mar, 2014
    molly
    Tukwila, WA
    My husband and I have bad credit and a middle class income. We are trying to obtain a VA loan on our home however we already owe around $290,000 to the bank. Is there any wa we can refinance through with a VA loan to pay off the debt on the house and just have one loan with the VA? And if so will if we can qualify do you think we can get a little extra cash for repairs on the house?
    0 Votes

    • BA
      Mar, 2014
      Bill
      Based on the information you provided, it will be difficult to take out money in a VA cash-out refinance. You will have to meet the lender's credit requirements. The lender will check both your debt-to-income level, which shouldn't be over 41% as well as your residual income. I recommend that you check out Bills.com mortgage rate table and see if you can get matched with a lender.
      0 Votes

  • CR
    Nov, 2011
    Chris
    Silver Spring, MD
    We have a VA loan that is current but the value is underwater - do you know if BB and T does IRRLs w/o appraisals?
    0 Votes

    • BA
      Nov, 2011
      Bill

      The VA does not require an appraisal on an IRRRL. I can't say whether BB&T does or not, as lenders can enforce stricter rules than the VA. I suggest that you call BB&T and also shop around for the best mortgage deal you can find. You are not bound to work with your current lender when you refinance your VA loan.

      0 Votes

  • JR
    Nov, 2011
    Jim
    Redmond, OR
    Is it possible to refinance a non-VA loan to a traditional VA loan?
    0 Votes

    • BA
      Nov, 2011
      Bill
      The non-VA status of your current loan is not a problem. It is definitely possible to refinance from a non-VA loan to a traditional VA loan, as long as you can obtain a VA Certificate of Eligibility. Please see Bills.com page about VA loans. In addition you will need to qualify for the loan based on your income, credit and LTV.
      0 Votes

  • MC
    Oct, 2011
    Mark
    Playa Del Rey, CA
    Why do some lenders require an appraisal on a VA streamline when the VA does not require it? If the loan is guaranteed, what difference does it make to the lender?
    0 Votes

    • BA
      Oct, 2011
      Bill
      Even though the lender may have reduced its risk because the loan is guaranteed, it wants to be cautious about having loans that go into default. If a home is worth far less than what is owed, there is a higher chance of default.
      1 Votes

  • EK
    Mar, 2011
    Eric
    Saratoga Springs, UT
    If you currently have a VA loan with GMAC or Wells Fargo then you will be able to do a VA IRRRL or VA streamline loan with no appraisal or any value determination.
    0 Votes

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