VA Refinance Requirements And Guidelines On VA Loans
This Article On VA Refinance Requirements And Guidelines On VA Loans Was PUBLISHED On July 15th, 2019
VA Refinance Requirements Explained
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 oes not require monthly mortgage insurance
- VA Loans 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
- The VA does not fund VA mortgage loans
- The VA insures VA Loans to private lenders in the event the borrowers defaults 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 insured and guarantees VA Loans that are originated by lenders in the 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.
VA Refinance Requirements And Benefits Of Refinancing
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 Refinance Requirements On 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 $484,350 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 Requirements 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 on 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 due 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 faster response. Or email us at email@example.com. Our staff and I are available 7 days a week, evenings, weekends, and holidays to take your phone calls or answer your email inquiries.