Refinancing with a VA Loan — The Pros

Veterans Day serves as a special reminder to express gratitude to all military personnel, past and present. There are over 16 million veterans who have served in at least one war. These are grandparents, parents, children, friends, and neighbors who have served in the armed forces for and made many sacrifices that contribute to the freedom and well-being of our country.

At Embrace Home Loans® we salute your bravery and dedication.

Now, so our Veterans can keep up-to-date and informed, we’d like to introduce you to three types of VA refinance loans available to VA mortgage holders.

To be clear, these loans are not a modification of your current VA loan but replace them with a new loan.

Who Is VA Eligible?

Generally speaking, when and how long you served will determine the service level criteria for a VA loan. If you served 90 consecutive days during a war, 181 consecutive days during peacetime, served for 6 years in the national guard or reserves, or if your surviving spouse qualifies, you might be eligible for a VA loan. Here’s some more information on VA borrower eligibility:

Personnel on Active Duty:
If you are presently serving, your eligibility can be determined after 90 days of nonstop active duty. It is necessary to restore eligibility after being released or discharged from active duty.

Six years of service in the Selected or National Guard, AND

• Discharged honorably, OR
• Placed on the retired list, OR
• Transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable, OR
• Continue to serve in the Selected Reserve

You Could Even Be Eligible if You Are:

• An un-remarried spouse of a Veteran who died while in service or from a service-connected disability
• A spouse of a Service Member missing in action or a prisoner of war
• A surviving spouse in receipt of Dependency and Indemnity Compensation (DIC) benefits in cases where the Veteran’s death was not service connected

What Makes a VA Refinance a Really Smart Choice?

Because a VA loan often requires less documentation than a regular mortgage, refinancing a VA loan may be simpler. Additionally, an appraisal might not be necessary depending on the refinance loan you select. Let’s take a look at three fantastic options.

1. The IRRRL, or Streamline Refinance
2. Cash-Out Refinance
3. Conventional to VA Refinance

Let’s Start with the Easiest

The Interest Rate Reduction Refinance Loan (IRRRL) is often called a VA streamline. If you hate paperwork, and who doesn’t, this loan requires less paperwork than any other VA loan. Qualified borrowers can refinance to a lower interest rate with less hassles and lower costs than their previous VA loan.

An IRRRL features:

• No documentation of income
• No credit report
• Generally, no new appraisal
• Up-to-date payments on your current VA loan for the past year
• Closing is more affordable than a conventional loan

To qualify for an IRRRL refinance, you’ll need to:

• Be refinancing a VA home loan
• Be up to date with payments on your current mortgage
• Be refinancing to a lower rate than that of your original mortgage
• Not be taking cash out from the new loan amount
• Certify that you currently reside or used to reside in the home you used purchased with the VA loan

There are certain steps you need to take when applying for a VA IRRRL refinance. We’ll be happy to walk you through the process and make sure you are getting the best possible deal.

VA Cash-Out Refinance

A VA cash-out refinance is a loan that replaces an existing loan with a VA loan and extracts cash from the subject property’s equity. Unlike the IRRRL, a cash-out loan is fully documented, and borrowers must provide the VA lender with their most recent paycheck stubs, W2 forms, and two years of federal tax returns.

The amount of cash available to the borrower is determined by evaluating the property’s current appraised value. Most VA lenders will approve a cash-out loan for up to 90% of the appraised value (up to 80 percent in Texas).

Conventional Loan to VA Refinance

While a VA streamline refinance allows only a VA-to-VA transaction, VA loans can be used to refinance other types of existing loans, including FHA and conventional mortgages. When current property values are a concern, refinancing from a conventional to a VA loan is makes a lot of sense.

While conventional loans allow for a refinance up to 90 percent of the current value of the property, a standard VA refinance (no cash-out) allows for a loan amount of up to 100 percent of the home’s value.

If the interest rate on the VA loan is lower than the interest rate on an existing conventional or FHA loan, it may make sense to refinance into a new VA mortgage.

If you are currently serving or have previously served in the military and are looking to refinance, a VA refinance is an excellent option to consider. Contact your local Embrace Home Loan® Office today and let us help give back for all you do and have done for our country.