What You Need to Know When Refinancing a VA Loan
If you’ve served our country, you’re eligible for a number of benefits, and one of the most valuable of these are Veterans Administration (VA) loans. VA Loans help make homeownership possible for some Americans who might struggle to be able to get a conventional home loan, particularly in areas where private financing may not be easily available.
While VA Loans are a good entry to home ownership for veterans, the benefits don’t necessarily stop when they purchase their home. That’s because veterans can make the most of their home’s equity and take advantage of lower rates, by refinancing their VA loans. At Cliffco Mortgage Bankers, we’ve helped veterans buy homes and refinance their VA loans, and we want to let you know the basics of refinancing a VA loan.
What is a VA Loan?
As we said above, VA Loans are designed to help veterans find home financing options that might not otherwise be available to them. A big attraction of VA loans is that they don’t require down payments for loans of up to $417,000 or higher depending on the area where you take out the loan. These loans also have a low minimum credit score requirement, depending on the lender. The Veterans Administration guarantees the loan through your lender.
The Basics of Refinancing VA Loans
There are two options for refinancing VA Loans, according to NerdWallet They are:
- Interest rate reduction refinance loans
- VA Cash-out Refinance
In order to be eligible for an interest rate reduction refinance loan, you must already have a VA mortgage and are looking to take a loan that has a lower interest rate, unless you’re trying to switch out of an adjustable rate VA loan. According to the VA, there’s no appraisal or credit underwriting package required when applying for the loan. A Certificate of Eligibility is normally required when you first apply for a VA loan. You won’t have to apply for another one when you refinance if you take your original certificate to your lender when you apply to refinance. An email confirmation that shows your prior use of the certificate may also suffice. Some lenders might require a minimum credit score or income or include a requirement that you do not have any late mortgage payments within the past year.
A cash-out refinance allows you to tap into your home’s equity. Unlike a rate reduction refinance there will always be a requirement of an appraisal. According to military.com, you’ll also have to provide employment documentation and W2 forms. While the VA doesn’t establish a minimum credit score, the website says most lenders require a minimum score of 620 in order to qualify. Be careful because there are funding fees up to 3.15 percent of the loan, but if you’ve built up a significant amount of equity, a VA cash-out can be an excellent opinion.
Cliffco Can Help Veterans Refinance
If you’re a veteran and a first time home buyer, or if you have a VA Loan and you’re looking to refinance, Cliffco Mortgage Bankers can help. Let us know what your situation is and we’ll help you understand your loan and refinancing options. Contact Cliffco today.