If you’re paying on a VA mortgage or are veteran with a conventional mortgage and want to take advantage of today’s low refinance rates there are several options available to you. According to the Veteran’s Administration, many veterans are struggling with qualifying for mortgage refinancing based on their employment status or income. Here are the basics you need to know about the VA government refinance program to help you lower your payment with today’s low mortgage refinance rates.
VA Interest Rate Reduction Refinancing Loan
The first mortgage refinancing option available for homeowners with an existing VA home loan is the Interest Rate Reduction Refinancing Loan (IRRRL). This is the VA version of the streamline refinance which requires little documentation or qualifying. In order to be eligible for the IRRRL refinance you must already have a VA mortgage loan and demonstrate a tangible benefit from the new home loan. This benefit would be lower refinance rates or converting from an adjustable rate mortgage to a fixed rate home loan.
You must be current on all of your mortgage payments and not have more than one 30-day late payment during the last year. You’ll be charged a fee to fund your IRRRL refinance of .5 percent of your home loan amount. You can pay this out of pocket at closing or roll the funding fee into your mortgage balance. If you’re a disabled veteran it is possible to get the funding fee waived.
The Interest Rate Reduction Refinancing Loan does not allow you to take any cash out against your home equity. Finally, you cannot consolidate your first and second mortgages using the VA streamline refinance.
The VA does not require a minimum credit score, home appraisal or proof of income to qualify for the IRRRL; however, many lenders enforce their own program rules called overlays. Some lenders require a minimum credit score of 640 or better just to qualify. If you find that you have trouble qualifying for the VA IRRRL because of lender overlays consider shopping around from a variety of lenders.
Not all lenders enforce program overlays when it comes to Interest Rate Reduction Refinance Loans. Community based and military credit unions are a good starting point when shopping for mortgage refinancing because they typically offer the lowest fees and refinance rates.
Other Mortgage Refinancing Options
If you’re a veteran and don’t already have a VA mortgage it is possible to refinance with a standard VA home loan. Be prepared to submit full documentation and meet the minimum qualifications for a VA mortgage loan. If you’re already paying on a VA mortgage and cannot find a lender to approve your IRRRL refinance you might still qualify for mortgage refinancing with the standard VA refinance. If you’re already in a VA mortgage and good credit and 20 percent equity you might want to look at both options to see which is cheaper.
If you decide to refinance with the standard VA mortgage you can expect to pay a loan origination fee which depending on the lender could be cheaper than paying the funding fee. If you’re short of cash it is possible to take higher refinance rates on a standard VA mortgage refinance to pay your loan origination fee and closing costs; however, in this case the IRRRL would most likely be the more attractive option.
If you’re looking to cash out on your standard VA mortgage refinance most lenders won’t let you borrow more than 90 percent of your loan-to-value ratio even though the VA allows up to 100 percent cash-out refinance loans.
Your Mortgage Refinancing Fees Matter
If refinancing with a standard VA home loan is going to be your best option remember that just because you’re getting a VA mortgage doesn’t mean you don’t have to worry about lender fees. The fees you pay for loan origination and closing costs will make or break the deal you’re getting on your VA refi. This includes paying unnecessary discount points to buy down your refinance rates.
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