New 2016 VA Refinance Requirements

VA Refinance Requirements Explained

VA Loans are extremely popular mortgage loans which offer no money down on a home purchase, has very lenient mortgage lending guidelines, does not require monthly mortgage insurance, and offers 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. VA does not fund VA mortgage loans. The Department of Veteran Affairs function is to insured and guarantee VA Loans that are originated by VA mortgage lenders in the even if a VA mortgage borrower were to default on their VA Loan. Due to the guarantee by the Department of Veteran Affairs, VA mortgage lenders can offer the lowest possible mortgage rates on VA Loans even though the VA borrower does not put any money down. Down payment has a major impact on mortgage rates on Conventional Loans because the less down payment a home buyer has to put down, the more risk the mortgage lender faces 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 on 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.

2016 VA Refinance Requirements: Why Refinance?

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. There are two types of VA Refinancing: A VA Streamline Refinance Mortgage, also known as a IRRRL For Veterans or 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 mortgage documents from the veteran where no home appraisal is not required, there are no credit score requirements, and 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 and a new home appraisal is required, credit will be pulled, and 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.

2016 VA Refinance Requirements: VA Loan Amounts

The Department of Veteran Affairs does not have a maximum VA Loan Amount Requirement, however, the VA will have a maximum loan amount that they will guaranty on a VA Loan. The VA Loan Guarantee amount is 25% of the VA mortgage loan. As an example, if a particular VA Mortgage Lender will originate and fund a $300,000 VA mortgage loan, the Department of Veteran Affairs will guarantee 25% of that VA Loan amount to the VA mortgage lender in the event if the VA mortgage borrower were not to pay their VA mortgage loan and go into default. VA mortgage lenders have set the maximum VA Loan limit which they will fund which is $417,000, unless the property is located in a high cost area like many parts of California.

One great benefit that VA homeowners have is that VA Refinance Requirements on VA cash out refinance mortgage loans is that VA allows VA mortgage lenders to lend up to 100% loan to value on cash out refinance VA mortgage borrowers.

Lets take a case scenario on a VA Refinance mortgage loan borrower needing a 100% LTV cash out refinance mortgage. If a VA borrower has a home that is appraised at $400,000, the VA mortgage lender can lend up to $400,000 to this VA refinance mortgage loan borrower. If this VA mortgage borrower has a current VA mortgage home 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 VA Refinance mortgage borrower would be $90,000 which is 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: VA Income 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 a IRRRL, or VA Streamline Refinance Mortgage Loan. However, with a VA Cash Out Refinance, VA mortgage lenders will require income and employment verification and the VA 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 Requirements: VA Loan Credit Requirements

On VA Streamline Refinance Mortgages, IRRRL, the VA mortgage lender will not have any credit score requirements or care about any other derogatory credit the VA borrower has with the exception that the VA borrower has been timely with their current VA mortgage payments for the past 12 months. However, credit scores and credit requirements does apply on VA cash out refinance mortgage loan borrowers. A home appraisal is required and the VA mortgage borrower can borrow up to 100% loan to value on a VA cash out refinance mortgage loan.

When a VA cash out mortgage loan borrower is considering a VA cash out refinance mortgage loan, both the loan officer and VA borrower should due their due diligence and make sure that there is a net tangible benefit to the VA mortgage loan borrower where it benefits the borrower by doing the refinance. VA mortgage loans do have a requirement of the VA funding fee. The VA funding fee can be as much as 3.15% of the amount of the VA, which 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 me at 262-716-8151 or email me at gcho@gustancho.com. My staff and I are available 7 days a week, evenings, weekends, and holidays to take your phone calls or answer your email inquiries.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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