VA Refinance Guidelines And Mortgage Options
VA Refinance Guidelines On Streamline and Cash-Out Refinancing are two different mortgage process systems. Gustan Cho Associates are experts in helping homeowners with either a rate and term VA streamline refinance or a cash-out VA refinance mortgage. In this article, we will be covering the VA refinance guidelines for VA streamlines and cash-out refinance loans.
Who Qualifies For A VA Refinance Mortgage Loan?
VA Loans are guaranteed by the United States Department of Veterans Affairs (VA). The loan may be issued by qualified lenders. The main purpose of the VA loan is to offer long-term financing to eligible American veterans or their surviving spouses (as long as they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans to purchase owner-occupant primary homes with no down payment. To be eligible for a home purchase and/or refinance VA loan, you need to be active duty and/or a retired veteran who has been honorably discharged with the minimum military service requirements to be awarded a VA certificate of eligibility. You need to have served in a branch of the U.S. Armed Services for at least 90 consecutive active days during wartime or at least 181 consecutive days of active military service during peacetime.
In this article, we will cover and discuss VA Refinance Guidelines With No Lender Overlays.
VA Loan Requirements
The major benefits of VA loans are that it offers 100% financing. No down payment is required. Closing costs can be covered with the seller’s concessions or lender credit. VA Loans is the only loan program that does not require Private Mortgage Insurance (PMI) with less than a 20% down payment. The VA loan allows veterans 103.3% percent financing (again no PMI) or a 20 percent second mortgage up to $6,000 for energy-efficient improvements. The “catch” is that there is a “funding fee” equal to 0 to 3.3% of the loan amount which is paid to the VA. However, the funding fee may be financed and is normally rolled into the VA Loan Balance.
When can you refinance your VA loan?
Veteran homebuyers who purchased a home at a high mortgage rate due to having lower credit scores and have rebuilt their scores after closing on their home should consider refinancing at a lower rate. VA mortgage rates are based on the borrower’s credit scores. The higher the scores, the lower the mortgage rates.
Here are the most common frequently asked questions on VA refinance loan guidelines:
- Do you have to wait 6 months to refinance?
- Does the VA do a cash-out refinance?
- Is a VA Irrrl a qualified mortgage?
- How much does it cost to refinance a VA mortgage?
Comparing VA Purchase Loan Requirements Versus VA Refinance Guidelines
In a purchase, veterans may borrow up to 103.3% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment. Under VA Refinance Guidelines, when a new VA loan is created, veterans may borrow up to 100% of reasonable value, subject to state laws.
Refinancing A Current VA Loan To A New VA Streamline
In a refinance where the loan is a VA loan refinancing to VA loan (IRRRL Refinance), the veteran may borrow up to 100.5% of the total loan amount. The additional .5% is the funding fee for a VA Interest Rate Reduction Refinance. We will focus on VA refinancing in this particular blog. VA loans allow veterans to qualify for loan amounts larger than traditional Fannie Mae / conforming loans. They are a nice “perk” for our brave men and women serving in the armed forces.
VA Lender Overlays Versus Agency VA Refinance Guidelines
The benefits of VA Loans is the following:
- VA does not have any credit score requirements
- However, to get an approve/eligible per Automated Underwriting System, the veteran borrower should have at least a 580 credit score
- VA does not have a maximum debt to income ratio requirement
- I have gotten approve/eligible on veteran borrowers with 580 credit scores and 60% DTI countless times and closed on their VA Loans
- The VA will insure a mortgage where the monthly payment of the loan is up to 60% of the gross monthly income versus 50% for a conforming loan
- The maximum VA loan guarantee varies by county
- As of 1 January 2020, there is no maximum loan limit on VA loans
This holds true although this amount may rise over $970,800 in certain specified “high-cost counties.
Types of VA Refinances
Eligible borrowers can refinance their homes with a VA loan. VA loans offer to refinance mortgages up to 100% LTV with no annual mortgage insurance at competitive mortgage rates. The main loan level pricing adjustments on VA loans are mortgage rates. The higher the credit scores, the lower the mortgage rates.
Can I Refinance With VA Loans?
Homeowners with a mortgage loan other than a VA loan can refinance to a VA loan. This includes homeowners with a current conventional, FHA, USDA, Jumbo, or non-QM loans. If for one reason or another you have a home financed with a different type of mortgage loan program other than a VA loan but have a VA certificate of eligibility (COE) and want to refinance it to a VA loan, you are allowed. VA streamline refinance mortgages only allows homeowners with a VA loan to refinance into a new VA loan. It is only for a VA to VA refinance transaction. VA refinance loan guidelines allow rate and term refinance with loan to value up to 100% LTV.
How Can I Qualify For VA Streamline Refinance?
What Documents and Paperwork are Required For a VA Streamline Refinance?
The VA IRRRL is a VA refinance loan with a fast-track streamlined mortgage process with much less paperwork, no income verification, no appraisal, and much less paperwork than a standard VA rate and term mortgage. Borrowers can get a net tangible benefit with a streamline refinance with a lower rate with a fraction of the paperwork and closing in three weeks or less. There are no out-of-pocket closing costs on VA streamline refinance with the exception of the VA funding fee.
Why VA IRRRL Streamline Is Different And Faster Than Rate and Term VA Refinance Loans
VA streamline requires no income documentation. This means the borrower doesn’t need to produce copies of their W2 forms, tax returns, or even pay stubs. Moreover, no verification of employment is needed whatsoever. However, specific lenders may include an appraisal or credit check as part of their internal risk assessment. Closing costs are usually charged by mortgage companies, but the categories and amounts can range from among companies. VA guidelines allow their funding fee and any closing costs to be rolled into the loan so that homeowners can refinance without out-of-pocket expenses. There is also a possibility of rolling in the expense of energy improvements on the home loan.
VA Streamline Loan Requirements
For IRRRL with the program, the current loan must be a VA loan. The interest rate on the new mortgage must also be lower than that of the current loan (the exception to this restriction is when refinancing from an adjustable-rate mortgage to a fixed-rate mortgage). Veterans may not receive any cash from the loan proceeds and no other debt, other than the original VA loan, may be paid off with the new loan Veterans must also verify that they previously occupied the home as a primary residence. Additional qualification criteria can apply based on individual lenders.
VA Cash-Out Refinance Mortgage Guidelines
A VA cash-out refinance is a loan that replaces an existing loan with a VA loan and pulls cash equity out of the property and into the pocket of the borrower. This is a fully documented loan, unlike the IRRRL, and requires the borrower to furnish their most recent paycheck stubs, W2 forms, and two years of federal tax returns to the VA lender. The amount of cash available to the borrower is calculated by determining the appraised value of the property. Most lenders will allow a cash-out loan amount up to 90% percent of the appraised value. For example, a borrower has a loan amount of $100,000 and wants to refinance to a lower rate. The appraised value is reported at $130,000, allowing for a maximum cash-out loan of 90% percent of the appraised value. Gustan Cho Associates will lend up to 90% LTV on VA cash-out refinance with an approve/eligible per Automated Underwriting System.
Refinancing Conventional To VA Loan
While a VA IRRRL refinance only allows a VA to VA transaction, VA loans can refinance other existing loan types including FHA and conventional mortgages. These types of loans are less common but can be advantageous to the borrower. Conventional loans allow for a refinance of up to 90 percent of the current value of the property. If an existing mortgage balance is $100,000 then the appraisal must be at least $111,111 before a conventional refinance can take place. If the home value comes in closer to $100,000, then the borrower can’t refinance their conventional loan with another conventional loan (the 90% threshold isn’t met). But refinancing into a VA loan can be an option in this case. A standard VA refinance (no cash-out) allows the loan amount to be up to 100 percent of the value of the home. In the above-mentioned example, let’s say the property appraised at $105,000 the loan can be refinanced from a conventional mortgage to a VA loan. If the interest rate is low enough for the VA loan compared to an existing conventional or FHA loan, then it can make sense to refinance into a new VA mortgage.
FHA And VA Cash-Out Refinance During Chapter 13 Bankruptcy
Many homeowners who file bankruptcy often want to keep their homes and reaffirm their mortgages. By reaffirming the mortgage, it means that the bankruptcy petitioner is willing to keep their home and keep their mortgage payment current. Going forward, reaffirmed mortgages need to be paid timely. Bottom line is that bankruptcy petitioners are asking the U.S. Bankruptcy Courts for permission in excluding their home loan outside bankruptcy. If the Bankruptcy Trustee is convinced the petitioner is able to afford their mortgage payments, then the reaffirmation of the mortgage gets confirmed. There are no loan level pricing adjustments on bankruptcy and/or foreclosure. What this means is borrowers will not get penalized by paying a higher rate due to a prior bankruptcy and/or a housing event such as a foreclosure, deed in lieu of foreclosure, short sale.
Ending Chapter 13 Repayment Early With An FHA And VA Cash-Out Refinance During Chapter 13 Bankruptcy
Homeowners can qualify for an FHA and VA cash-out refinance during Chapter 13 Bankruptcy repayment plan. Home values have been skyrocketing for the past several years. Many homeowners have substantial equity in their homes due to the booming housing market. Many of our borrowers who are in a Chapter 13 bankruptcy repayment plan are doing a cash-out refinance with an FHA and/or VA loans and ending the Chapter 13 repayment early.
FHA and/or VA Cash-Out Refinance During Chapter 13 Bankruptcy Payment Plan To Buy Out Chapter 13 Bankruptcy Debt Early
Many of our clients have more than enough money from the proceeds of the cash-out refinance. You need to be in the Chapter 13 bankruptcy repayment plan for at least 12 months to become eligible. It needs to be a manual underwrite and need trustee approval. There is no waiting period after the Chapter 13 Bankruptcy discharged date. If the bankruptcy discharge has not been seasoned for at least 24 months, it needs to be a manual underwrite. The maximum loan to value on FHA cash-out refinance loans is 80% LTV. VA loans allow up to a 100% cash-out refinance.
Taking Advantage Of Low Rates With A Rate And Term Refinance During Or After Bankruptcy
Homeowners who want to take advantage of today’s historic rates can do a rate and term refinance and can save tens of thousands of dollars during the life of the loan. Borrowers with higher than 4.0% rates can refinance after bankruptcy with rate and term loans to lower their payments. Or if they have equity in their homes, they can refinance after bankruptcy and do a cash-out refinance. In this blog, we will discuss qualifying for a mortgage after bankruptcy and the waiting period requirements.
Lowering Monthly Payments By Refinance After Bankruptcy
After consumers get their bankruptcy discharged, they have a fresh start in life. Most never want to see credit again. However, many folks with a home mortgage often want to know if they can lower their mortgage payments by refinancing after bankruptcy. With mortgage rates at historic lows and being at a 24 month low, many homeowners with VA and/or FHA Loans can take advantage of VA and/or FHA Streamline Refinance. loans.
Save Tens of Thousands of Dollars By Refinancing with Streamline Refinance Loan
VA and FHA offer a fast-track streamline refinance loan program with limited documentation. There is no appraisal required, no income documentation, and borrowers can close in 21 days or less. Rate and term refinance are only allowed with streamlines. Credit scores determine mortgage rates. The higher the credit score, the lower the mortgage rates. There is no waiting period after bankruptcy to qualify for VA and/or FHA Streamline Refinance. Cash-out is not allowed on streamline refinances.
How Can I Qualify For An FHA and/or VA Cash-Out Refinance During Chapter 13 Bankruptcy
To do a full credit and income-qualified refinance after bankruptcy, there are mandatory waiting period requirements. Here is the waiting period to refinance after bankruptcy: FHA loans require a two-year waiting period after the Chapter 7 Bankruptcy discharged date. VA requires a two-year waiting period after the Chapter 7 Bankruptcy discharged date. USDA loans require a three-year waiting period. Fannie Mae and Freddie Mac require a four-year waiting period to refinance after the bankruptcy discharge date. NON-QM loans have no waiting period requirements.
FHA and VA Manual Underwriting During Chapter 13 Bankruptcy Repayment Plan
VA and FHA allow borrowers to refinance during a Chapter 13 Bankruptcy repayment plan with trustee approval but needs to be a manual underwrite. There is no waiting period after a Chapter 13 Bankruptcy discharge date on VA and FHA loans. Any VA and/or FHA loans with less than 2 years or less after Chapter 13 Bankruptcy discharged date seasoning needs to be a manual underwrite.
Loan To Value Cash-Out Refinance Mortgage Guidelines
The following are loan to value requirements when it comes to cash-out refinance mortgage:
- HUD allows up to an 85% Loan To Value on cash-out refinance
- VA allows up to 100% Loan To Value on cash-out refinance
- Fannie Mae and Freddie Mac allow up to an 80% cash-out refinance mortgage on conventional loans
FHA And VA Manual Underwriting Cash-Out Refinance Guidelines During Chapter 13 Bankruptcy
Borrowers who need to qualify for a mortgage with a mortgage company licensed in multiple states with no lender overlays on government and conventional loans, please contact us at Gustan Cho Associates at 262-716-8151. Borrowers can email us at [email protected] or text us for a faster response. Gustan Cho Associates are experts in helping borrowers qualify for an FHA and/or VA loan during Chapter 13 Bankruptcy repayment plan. GCA Mortgage are experts in manual underwriting. There is no waiting period after the Chapter 13 Bankruptcy discharged date. We have a national reputation for not having any lender overlays on government and conventional loans. Borrowers can email us at [email protected] Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.
VA Refinance Mortgage Options For Homeowners
General Guidelines On VA Refinance Loans
What Are VA Refinance Loans
Rate And Term VA Refinance Loans
VA Cash-Out Refinance Mortgages
Shopping For The Best Mortgage Rates On VA IRRRL Refinance
Net Tangible Benefit Requirements on VA IRRRL Refinance
Waiting Period Guidelines To Refinance
Starting The Mortgage Process
VA Refinance Requirements And Guidelines On VA Loans
VA Loans are extremely popular mortgage loans in the United States:
- VA loans offer no money down on a home purchase, has very lenient mortgage lending guidelines
- VA loans do not require monthly mortgage insurance
- VA loans offer one of the lowest mortgage rates out of all mortgage loan programs around
- However, VA Loans are only available to veterans of the United States Armed Services with a VA Certificate Of Eligibility
- The U.S. Department of Veteran Affairs is in charge of setting up rules and regulations on VA loans
- The VA does not fund VA mortgage loans
- The VA insures VA loans to private lenders in the event the borrowers default and forecloses on their VA loans
In this article, we will cover and discuss VA Refinance Requirements And Guidelines On VA loans.
Role And Function Of The Department Of Veterans Affairs
The Department of Veteran Affairs’ function is to insure and guarantee VA Loans that are originated by lenders even if a borrower were to default on their VA Loan.
- Due to the guarantee by the Department of Veteran Affairs, lenders can offer the lowest possible mortgage rates on VA Loans
- This holds true even though the borrower does not put any money down
- Down payment has a major impact on mortgage rates on Conventional Loans
- This is because the less down payment a home buyer has to put down, the more risk the lender’s faces
- This is because it is easy for a homeowner to walk out of their mortgage loan obligations if they have no skin in the game and have no money of their own invested in the home they are buying
- However, if a homeowner has his or her hard-earned money invested in a home purchase, they are much less likely to walk away from their mortgage obligations if they were going through some tough financial times
As with any other mortgage loan program, a homeowner with an existing VA Loan can refinance their current VA Loan into another VA Loan for various reasons that would benefit the homeowner.
Benefits Of Refinancing On VA Loans
Refinancing a home loan is when a homeowner pays off their current mortgage loan and replaces the existing home loan with another brand new mortgage loan to lower their monthly payment and/or get a cash-out.
- There are two types of VA Refinancing
- A VA Streamline Refinance Mortgage, also known as an IRRRL For Veterans
- Interest Rate Reduction Refinance Loan which is a Department of Veteran Affairs mortgage loan program that streamlines a current VA Loan by only requiring minimal documents from the veteran
- There is no home appraisal is not required
- There are no credit score requirements
- There are no income and employment verification that is required
- The second type of VA Refinance is a standard VA Loan Refinance Mortgage
- With a VA Loan Refinance Mortgage, it is like getting a brand new VA Loan
- A new home appraisal is required, the credit will be pulled
- Income and employment verification is required
VA Cash-Out Refinance Mortgage Loans are standard VA Loan Refinance Mortgage Loans and a VA homeowner can get 100% loan to value cash out on a VA Cash-Out Refinance Mortgage Loan.
VA Loan Limits
The Department of Veteran Affairs does not have a maximum VA Loan Amount Requirement:
- The VA no longer has a maximum loan amount that they will guaranty on a VA Loan
- The VA Loan Guarantee amount used to be 25% of the VA mortgage loan
- As an example, if a particular Lender will originate and fund a $300,000 VA mortgage loan, the Department of Veteran Affairs guarantees 25% of that VA Loan amount to lender in the event if the borrower were not to pay their mortgage loan and go into default
- Lenders used to set the maximum VA Loan limit which they will fund which used to be $647,200 unless the property is located in a high-cost area like many parts of California
VA Cash-Out Refinance Mortgage Guidelines
One great benefit that homeowners have is that VA Refinance Requirements on VA cash-out refinance mortgage loans is that VA allows lenders to lend up to 100% loan to value on cash-out refinance borrowers.
- Let’s take a case scenario on a borrower needing a 100% LTV cash-out refinance mortgage
- If a VA borrower has a home that is appraised at $400,000, the lender can lend up to $400,000 to this borrower
- If this borrower has a current VA loan of $300,000 and the closing costs for this VA Refinance mortgage loan is $10,000, the net proceeds that will go to this borrower would be $90,000
- The $400,000 new loan amount less the $300,000 current VA Loan payoff, less the $10,000 VA Refinance mortgage loan closing costs
VA Refinance Requirements On Documentation Requirements
VA Refinance Requirements on a VA Streamline Refinance Mortgage, IRRRL, does not require any income or employment verification.
- However, this does not apply with an IRRRL or VA Streamline Refinance Mortgage Loan
- However, with a VA Cash-Out Refinance, lenders will require income and employment verification and the borrower needs to make sure that they have the appropriate debt to income ratio requirements
- Two years tax returns, two years W2s, and 30 days of the borrower’s paycheck stubs will be required
VA Refinance Guidelines On Credit Requirements
On VA Streamline Refinance Mortgages, IRRRL, the lender will not have any credit score requirements. Lenders do not care about any other derogatory credit the borrower has with the exception that the borrower has been timely with their current mortgage payments for the past 12 months.
- However, credit scores and credit requirements do apply for a VA cash-out refinance mortgage loan borrowers
- A home appraisal is required and the borrower can borrow up to 100% loan to value on a VA cash-out refinance mortgage loan
When a VA cash-out borrower is considering a cash-out refinance mortgage loan, both the loan officer and the borrower should do their due diligence and make sure that there is a net tangible benefit to the borrower. Needs to have benefited the borrower by doing the refinance. VA loans do have a requirement for the VA funding fee. The VA funding fee can be as much as 3.15% of the amount of the VA. This VA funding fee will reduce the net proceeds of the cash that the VA borrower will receive from the cash-out refinance mortgage.
If you are interested in doing a VA mortgage refinance and are looking for a VA lender with no lender overlays, please contact us at 262-716-8151 or text us for a faster response. Or email us at [email protected] Our staff and I are available 7 days a week, evenings, weekends, and holidays to take your phone calls or answer your email inquiries.