Are you a veteran looking to refinance your mortgage? If so, you may be eligible for a VA loan refinance. VA loans are designed to help veterans and their families buy, build, or improve homes. Refinancing your VA loan can help you lower your interest rate, reduce your monthly payment, or cash out some of your home equity. However, before you apply for a VA loan refinance, you need to meet certain requirements. In this article, we will explain everything you need to know about VA loan refinance requirements.
What is a VA Loan Refinance?
A VA loan refinance is a new loan that pays off your existing VA loan. There are two types of VA loan refinances: the Interest Rate Reduction Refinance Loan (IRRRL) and the Cash-Out Refinance Loan. The IRRRL, also known as the VA Streamline Refinance, is designed to help you lower your interest rate and monthly payment. The Cash-Out Refinance Loan, on the other hand, allows you to borrow against your home equity and get cash back.
Why Refinance Your VA Loan?
There are several reasons why you may want to refinance your VA loan:
- To lower your interest rate and monthly payment
- To shorten your loan term and pay off your mortgage sooner
- To switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (FRM)
- To get cash back for home repairs, debt consolidation, or other expenses
Whatever your reason for refinancing, make sure you understand the VA loan refinance requirements first.
VA Loan Refinance Requirements
To qualify for a VA loan refinance, you need to meet the following requirements:
Requirement |
Explanation |
|---|---|
VA Loan Eligibility |
You must be eligible for a VA loan and have a VA Certificate of Eligibility (COE). |
Occupancy |
You must currently occupy the property as your primary residence. |
Loan Type |
Your current loan must be a VA loan. |
Loan Balance |
Your current loan balance must be greater than zero. |
Loan Age |
Your current loan must be at least 210 days old (6 months). |
Loan Payment History |
You must have made your last 12 monthly payments on time. |
Debt-to-Income Ratio |
Your debt-to-income ratio (DTI) must be within the lender’s guidelines. |
Credit Score |
Your credit score must meet the lender’s minimum requirement. |
Property Appraisal |
The property must be appraised by a VA-approved appraiser. |
Loan Limits |
The new loan amount cannot exceed the VA loan limits for your county. |
Funding Fee |
You may be required to pay a VA funding fee, unless you are exempt. |
Closing Costs |
You will need to pay closing costs, unless you negotiate a no-cost refinance. |
What is a VA Funding Fee?
A VA funding fee is a one-time fee that is paid at closing. The fee is a percentage of the loan amount and varies depending on your military status, down payment, and number of times you have used your VA loan benefit. The VA funding fee helps offset the cost of the VA loan program and enables veterans to buy homes with little or no money down. If you have a service-connected disability, you may be exempt from the VA funding fee.
FAQs: VA Loan Refinance Requirements
1. Can I refinance my VA loan if I have a conventional loan?
No, you cannot refinance a conventional loan with a VA loan refinance. You can only refinance a VA loan with another VA loan.
2. What is the minimum credit score for a VA loan refinance?
The minimum credit score for a VA loan refinance varies by lender, but most lenders require a score of at least 620.
3. Can I refinance my VA loan if I am behind on my mortgage payments?
No, you cannot refinance your VA loan if you are currently behind on your mortgage payments. You need to be current on your payments for at least 12 months to qualify for a VA loan refinance.
4. How much can I borrow with a VA Cash-Out Refinance Loan?
You can borrow up to 100% of your home equity, minus the VA funding fee and closing costs.
5. How long does it take to close a VA loan refinance?
The time it takes to close a VA loan refinance depends on several factors, such as the lender’s processing time, the property appraisal, and the title search. Typically, it takes between 30 and 45 days to close a VA loan refinance.
6. Can I refinance my VA loan if I have a second mortgage?
Yes, you can refinance your VA loan if you have a second mortgage, but the second mortgage must be subordinated to the new VA loan.
7. Can I get cash back with a VA Streamline Refinance?
No, you cannot get cash back with a VA Streamline Refinance. The IRRRL is only designed to lower your interest rate and monthly payment.
8. How much does it cost to refinance a VA loan?
The cost to refinance a VA loan varies depending on the lender, the loan amount, and the type of refinance. You may be required to pay a VA funding fee, closing costs, and other fees.
9. Can I refinance my VA loan if my home value has decreased?
Yes, you can refinance your VA loan if your home value has decreased, but you may have to bring money to the closing table to cover the difference between your current loan balance and the appraised value of your home.
10. What is the VA Cash-Out Refinance Loan Limit?
The VA Cash-Out Refinance Loan Limit is the maximum loan amount you can borrow with a Cash-Out Refinance Loan. The limit is 90% of the appraised value of your home, minus the VA funding fee and closing costs.
11. Can I use the VA funding fee as part of my closing costs?
No, you cannot use the VA funding fee as part of your closing costs. The funding fee must be paid separately at closing.
12. Can I refinance my VA loan if I am unemployed?
You may be able to refinance your VA loan if you are unemployed, but you will need to have a source of income to qualify. You may also need to provide additional documentation to show that you can afford the new loan.
13. Can I refinance my VA loan if I have a bankruptcy or foreclosure?
You may be able to refinance your VA loan if you have a bankruptcy or foreclosure on your record, but you will need to wait a certain amount of time and meet other requirements. For example, if you had a Chapter 7 bankruptcy, you will need to wait at least 2 years before you can apply for a VA loan refinance.
Conclusion
Refinancing your VA loan can be a smart way to save money or get cash back. However, you need to meet certain VA loan refinance requirements first. In this article, we explained everything you need to know about VA loan refinance requirements, from occupancy and loan age to credit score and loan limits. We also answered some frequently asked questions about VA loan refinancing. If you meet the requirements and are ready to refinance your VA loan, shop around for the best rates and terms. Remember, every lender has its own guidelines and fees, so do your research and compare offers before you make a decision.
Thank you for reading! We hope this article has been informative and helpful. If you have any questions or comments, please feel free to reach out to us. We would love to hear from you!
Disclaimer
This article is for informational purposes only and does not constitute legal, financial, or investment advice. You should consult with a qualified professional before making any decisions regarding VA loan refinancing. The information in this article is accurate as of the publication date, but may be subject to change. The author and publisher disclaim any liability for any loss or damage incurred as a result of the information in this article.