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Refinancing Your Home Through the VA

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If you are struggling with the interest rates and payments on your current loan, are looking to refinance, and are a veteran, active service member, you might want to consider looking into the loan options available through the Veteran’s Administration (VA). If you are a spouse, or surviving spouse, of a veteran or service member, you could also qualify for a loan guaranteed by the VA.

The biggest advantages of refinancing through the VA is that you can refinance up to 100-percent of your home’s value, even if you don’t have equity, and you don’t have to pay for mortgage insurance.

There are three options available to eligible homeowners: The Interest Rate Reduction Refinance Loan (IRRL), Cash-Out Refinancing, and converting a Conventional Loan to a VA Loan.

The Interest Rate Reduction Refinance Loan (IRRL)

This option is available to borrowers who already have an existing VA home loan. The IRRRL allows you to reduce your interest rate to reduce the monthly payments on your loan. You can also use the IRRRL to shorten the term of your loan, so that you can pay it off faster.

The advantage to the IRRRL is that the VA does not require a credit check or appraisal for you to qualify for the loan. It’s also possible to get the loan without having to pay out-of-pocket for closing costs and other fees. However, the fees for the IRRL are generally lower than they would be for a conventional loan.

The disadvantage to the IRRRL is that you can’t use an IRRRL for a cash-out refinance. Also, you might end up paying more in interest if you opt to shorten the term of your loan, or avoid closing costs. You also cannot use the IRRRL to pay off a second mortgage on your home, without first getting approval from the second lender.

If you have an existing VA loan and do not need a cash-out refinance, the IRRRL could be the option for you.

Cash-Out Refinance

This option is available to borrowers who already have an existing VA home loan and want to borrow against the equity in their homes. You can use the cash-out refinancing program to get money to put back into your home, and you can also use it if you have a double mortgage to consolidate them into a single payment, and possibly at a lower interest rate.

Just like the IRRRL, you can refinance up to 100 percent of your home’s value, but you will need to pass a credit check and have an appraisal of the property. However, you won’t have to make a down payment or pay for private mortgage insurance, and there will be limits on the amount that you’ll have to pay in closing costs.

If you have an existing VA loan, a strong credit history, and need cash-back, a Cash-out Refinance could be the option for you.

Convert a non-VA loan into a VA Loan

The process of converting a non-VA loan into a VA loan is similar to a cash-out refinance. The difference is that you don’t already have a VA loan, so you also have to make sure you meet the VA’s eligibility requirements.

Once you meet the requirements, you’ll have the same advantages and disadvantages as someone doing a cash-out refinance on an existing VA Loan.

Getting a VA Loan

VA loans and IRRRL loans are both handled by private lenders like Lowvarates.com, who might also offer other refinance options the would allow you to use the equity in your home for a specific purpose, such as home improvement or debt consolidation.

If you have never applied for a VA loan before, you will also need to gather and submit the necessary documentation to get a Certificate of eligibility from the VA, which you will need to present to the lender.

Once you have proven your eligibility, the process of applying for the loan is similar to that of a conventional loan – the lender will do a credit check, appraise your home, and determine how much they can lend you. The only exception to this process in the IRRRL, for which there is no credit check or appraisal.

As you can see, there are a lot of advantages to refinancing through the VA, especially if you already have a VA loan. This is because the VA guarantees the loan, which gives both lenders and borrowers peace of mind. Because of that guarantee, you don’t need to make a down payment, you’ll have significantly lower fees and closing costs, and you can get some loans without a credit check.

If you are a veteran, active service member, or eligible spouse or widow(er), VA refinancing could be the best option for you.

Posted on February 10, 2015.

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Mortgage, Real Estate

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