Veterans Affairs (VA) loans are a special home loan program available to Veterans, service members and certain eligible spouses. These loans are provided through mortgage lenders and are insured by the federal government, while requiring $0 down – and no private mortgage insurance – to purchase a property. VA loans provide flexible requirements and are the most viable financing option for Veterans and Service Members who possess a valid Certificate of Eligibility (COE).
VA-approved borrowers include Veterans and service members who have:
– Served 181 days during peacetime
– Served 90 days during wartime
– Served 6 years in the Reserves or National Guard
– Have been a spouse of a service member killed during the line of duty
The most common type of VA refinance program is the VA Streamline Refinance (i.e. Interest Rate Reduction Refinance Loan (IRRRL)) and is commonly referred to as a VA-to-VA refinance.
Basic eligibility requirements for an VA Streamline refinance include:
– Remaining current on the mortgage with no more than one late payments in the last year.
– Verifying that you previously occupied the property
– New monthly payments for the IRRRL must be lower than the former loan’s monthly payment unless you refinance to a fixed rate mortgage from an ARM.
– Not Receiving any cash from the IRRRL.
– Must have formerly used your VA Loan eligibility on the home you want to refinance.
VA Cash-Out Refinance Loans
VA Cash-Out Refinance Loans also offer an alternative for Veterans to refinance their homes. This type of loan not only allows one to lower their interest rate but to take cash from the home’s value. One thing that people mistake this loan for however is another second mortgage. The VA Cash-Out refinance loan actually replaces the existing mortgage instead of acting as a second home equity loan or line of credit. There are also few limits in some cases with this loan, enabling those who qualify to refinance up to 100% of the home’s value. Like any other Refinance loan, this one must be used as a principal dwelling by the owner. There is no set amount of time you have to have lived in the home for this loan, but like any other second mortgage there must be a pool of equity in the home to draw from.
Frequently Asked Questions About VA Streamlines
Are Certificates of Eligibility (COE) required for Streamline Refinances?
No, this is because your Certificate was already used to get your first VA loan.
Are interest rates for VA loan types controlled by the VA?
No, the rates are set by banks who purchase and sell the mortgages.
Does my current lender have to refinance my VA loan?
No, veterans like all other borrowers are allowed and encouraged to shop around from lender to lender. Interest rates will vary from location to location, but the lender must be VA approved.
Do I have to go through another credit check and appraisal for refinance?
There is no general requirement that you have to do this again, however many lenders prefer to in order to make sure you are still financially stable and that your home’s value is still higher than their maximum loan amount.
Am I required to be eligible for a lower interest rate to qualify for the Refinance?
Only if you meet certain conditions. For example, most lenders generally won’t care if you’re moving from an ARM to a fixed rate mortgage. Those moving from one Fixed rate loan to another though may be put under stricter conditions.
Do VA loans qualify for the HARP 2.0 program?
No, because HARP 2 loans must be backed by Fannie Mae and Freddie Mac, not the VA.
Do VA loans qualify for the HARP 3 program?
This depends on the whether it will get you a better deal than a VA Streamline Refinance. There are fewer verifications required with the VA Streamline
Refinance, and mortgage rates may be lower.
Can I obtain a no money down mortgage with a VA loan?
Yes, because the VA loan allows for 100% financing with no down payment.