Veterans have a couple of options when refinancing their mortgage.
Whether you already used your VA benefits or borrowed another type of mortgage, there are a few ways to refinance using your VA home loan benefits.
VA Streamline Refinance
The VA Interest Rate Reduction Refinance Loan (IRRRL) is for veterans who already have a VA loan and want to refinance into a lower interest rate or payment.
To be eligible, you must benefit from the refinance.
For example, if you can secure a lower interest rate and a lower monthly payment, you benefit from refinancing and will be eligible.
Qualifying for a VA Streamline Refinance
It’s simple to qualify for a VA streamline refinance because it requires little paperwork.
The mortgage underwriter determines your eligibility based on your current VA loan.
They determine if you’ve made your payments on time and if you benefit from refinancing.
If you meet those two requirements, you don’t have to verify your income, assets, or the home’s value.
If you qualify, you can refinance your existing VA loan, no matter your loan-to-value ratio.
However, the new loan should be more affordable or have a better term.
VA Cash-Out Refinance
The VA cash-out refinance lets you get a hold of your home’s equity.
You aren’t required to have a current VA loan to be eligible.
The VA cash-out refinance program is more flexible than a conventional loan refinance.
For example, you don’t have to worry about leaving 20% equity in your home.
Instead, most VA borrowers can tap into 90% – 100% of their home’s value.
Qualifying for a VA Cash-Out Refinance
Qualifying for a VA cash-out refinance is more challenging than the IRRRL.
Because your loan amount is going to increase, you must prove you can afford it, along with these factors:
- Have a decent credit score (usually 620+)
- Provide paperwork for your income with paystubs, W-2s, and/or tax returns
- Your debt-to-income ratio is no higher than 50% with the new loan. (note: debt ratio can possibly be higher depending on the credit score)
Refinancing out of a VA Loan
Refinancing your VA loan into a conventional will release your entitlement so you can use your benefit again to purchase another house.
This process is best done when you have at least 20% equity, so you don’t have to pay PMI.
Qualifying for a Conventional Loan
A VA to conventional loan refinance means you must prove your qualifying factors, just as if you were using the conventional loan to buy a home.
The requirements include the following:
- A credit score of 620+
- A debt-to-income ratio of 43% or less
- Stable income and employment for the last 2 years
- 5% – 20% equity in the home
Refinancing with a VA loan is easy; it just depends on your financial goals. Whether you want better rates/terms, cash out, or reinstate your entitlement by refinancing into a conventional loan, you can use your benefits and enjoy homeownership.
Are you ready to apply? Start the process by completing the form below.