As a qualified veteran, you can refinance your VA-backed mortgage in two main ways: Interest Rate Reduction Refinance Loan(IRRRL) and the VA Cash-out Refinance. Recent statistics show that these VA home loan refinancing options attracted 65.64% of the total VA loans in 2020.
Read on to understand more.
1. Interest Rate Reduction Refinance Loan (IRRRL)
The IRRRL program is also known as Streamline Refinance, implying that the process is fast and straightforward.
IRRRL (Interest Rate Reduction Refinance Loan) can enable you to switch from adjustable-rate to fixed-rate mortgage, lower your monthly mortgages, and lower interest rates.
Why Do You Need to Refinance with IRRRL?
- Your new mortgage comes with different loan terms. With low-interest rates, you can change your loan term length and even lower your monthly payments.
- It is a quick process without an appraisal as it was with your initial mortgage
- The IRRRL refinancing underwriting process does not require your debt to income ratio and credit score.
- IRRRL loans funding fee is 0.5% of your loan amount, and the fee can be waived in case of disability. This fee can also be rolled to a new loan during closing.
- You are free to refinance with a different lender from the lender you initially used on your mortgage.
Qualifying for IRRRL
Generally, not all veterans qualify for VA IRRRL. Here are some basics you need to meet.
- Your primary residence currently need not be in your VA-backed home but show proof that you once lived there.
- You should have a VA Home loan. Streamline Refinance only applies from VA mortgage to another VA mortgage and not from a different mortgage to a VA loan.
- IRRRL refinancing works after 210 days since you made your first mortgage payment
- If you have made six months of mortgage payments of your VA loan and no late mortgage payments in the last year.
Streamline Refinance (IRRRL) Process
This is an easy process whereby you first
- Identify a lender – Browse through lenders that match the terms and rates that suit you.
- Submit necessary documentation to your lender – Fortunately, your lender requests few details since your early mortgage loan information is available on the VA home loan website.
- Pay your loan closing costs – Or roll them over to a new loan.
All this said and done. Your lender can now process your streamlined refinancing to enable you to enjoy the benefits of low monthly payments and low-interest rates.
Cash-Out Refinancing VA Loan
Under this Cash-Out Refinancing program, you can switch your current mortgage to a new home loan higher than you currently owe on your home.
Why Do You Need to Consider Cash-Out Refinance?
You can refinance up to 100% of the value of your property.This refinancing taps on your home equity to give you cash. Applies with either a VA loan or a conventional loan to a VA loan.
Qualifying for Cash-Out Refinancing
For you to be eligible for this program as a veteran you should
- Have the certificate of eligibility (COE). This will help lenders verify if you meet service requirements to access a VA loan.
- Meet your lender’s credit score and debt to income ratio necessities.
- You need to get an appraisal from your lender on your home. This helps evaluate the amount of money you will get after refinancing.
- Pay a Funding Fee of 2.3% of your loan for the first VA loan and 3.6% for the subsequent loan. The fees can be paid from the cash-out refinance.
- Certify that you occupy your VA loan home currently.
VA Cash-out Process
This process first requires you to determine your eligibility by applying for the certificate of eligibility (COE). Additionally, provide your credit score. Some lenders may request your federal tax obligations.
You will also have to submit W-2 forms for the last two years and all necessary documentation that your lender may request. Clear your loan closing costs and fees upfront.
Get Started with Refinancing Your Home!
Once you access the VA loan, your journey should not end there. You can still tap into the benefits of VA home loan refinancing to help you lower your interest rates and lower monthly payments.
Additionally, you can change your loan period and potentially access money to sort yourself out in debt repayment and home improvements.