If you’re interested in refinancing your V.A. loan, it’s important to understand all the requirements and restrictions of this type of loan before making any decisions. These loans can have some benefits, but they also have drawbacks that may not make them the best option for you. Read on to learn more to refinance a VA loan.
The Biggest Benefits of V.A. Loans
One of the biggest benefits of V.A. loans is that they don’t require you to make a down payment. That said, it’s not possible to refinance a V.A. loan in general—and any potential savings come with caveats. When it comes to refinancing, you might lose some or all your borrower benefits (like veteran-specific tax breaks and relocation stipends).
Since there are no set standards for V.A. loans, each lender has its guidelines for eligible veterans. It leads to confusion when comparing one V.A. mortgage offer against another since some lenders have more relaxed rules than others.
In addition, while V.A. loans are ideal for veterans looking to buy their first home (or they’re second or third), existing homeowners can also apply for these special mortgages.
If you qualify as an existing homeowner who needs a new V.A. mortgage and plans on taking out more than $250K in new financing, consider working with a broker instead of going directly through your local V.A. office.
How VA Loans Work
V.A. loans are great options for veterans who want to buy homes, and veterans Affairs gives them working as a lending partner with many banks and lenders. The VA gives out zero-down loans and allows existing homeowners to refinance their home—but can you refinance V.A. loans? Well, you sure can.
What You Need to Know About Refinancing
Here’s what you need to know if you’re considering refinancing your V.A. loan: You can refinance it. Here’s how. You can refinance your loan either for a lower interest rate or more cash out.
The latter is also known as an extended draw, which means that you won’t have to begin making payments until six months after closing on your new mortgage (vs. five years on other loans).
Pros and Cons of Borrowing Against Your Home Equity
When you take out a home equity loan or line of credit, it means that you are borrowing money against your house. So if your house is worth $200,000 and you have $150,000 in equity, you can borrow $50,000 against that equity. While home-equity loans and lines of credit are fairly easy to obtain, they are also expensive forms of debt.
How To Get Started
To refinance your V.A. loan, you’ll need access to an FHA loan (the process for conventional loans is slightly different). Your lender will request information about your existing loan, including its current interest rate, term, and amount owed.
It would be best to ask them for terms on both FHA and conventional refinancing options; then, you can compare the pros and cons of each option to determine which one works best for you.
Frequently Asked Questions
Yes, it is possible to refinance a V.A. loan, though you’ll need to meet specific requirements for it to be approved. The process of refinancing your loan will differ depending on whether you have yet to pay off your original loan or if you are currently making payments on it. However, in both cases, lenders will look at factors such as income and credit history before approving or denying your request.
What is a V.A. loan?
A VA loan is a special type of loan that can buy, build, or repair a home. It is also sometimes called a V.A. home loan or a V.A. home financing.
What are the benefits of a V.A. loan?
The benefits of a V.A. loan include:
- No private mortgage insurance (PMI) or down payment assistance is required.
- Your total debt-to-income ratio is calculated at the time of purchase, so you know how much house you can afford.
How much can I borrow on a V.A. loan?
You can borrow up to 100% of the house’s appraised value.
Who qualifies for a V.A. home loan?
You can qualify for a V.A. loan if you:
If you are an active member of the armed forces of the United States or a former member of the armed services who are honorably discharged.
What are the benefits of V.A. Loans?
No down payment or private mortgage insurance is required.