VA Refinance Program – Maximizing Home Loan Benefits
Every homeowner with an existing loan dreams of lowering their interest costs or monthly payments or of pulling out cash from their home equity so that they could use the extra bucks in other projects such as home improvement, debt payment, or new investments.
This dream can be a reality if you are a Veteran or active army personnel who own a home with an existing VA mortgage. This is possible through a VA refinance program.
Refinancing does not mean adjustment of their current loan but allows them to replace their current loan with a new one under separate terms yet with the same popular benefit of VA home loan that provides $0-down mortgages.
There are two main programs to refinance your existing VA mortgages to a lower rate:
· The VA Streamline Refinance, also known as the Interest Rate Reduction Refinance Loan (IRRRL)
· VA Cash-out Refinance.
VA Streamline Refinance (VA IRRRL)
As the name suggests, VA Streamline Refinance or VA IRRRL (VA Interest Rate Reduction Loan) is one of the most simplified processes of gaining loan approval as it eliminates the need for VA appraisal or other typical paperwork such as underwriting processes, etc. saving much time and fees of both the lender and the borrower.
Apart from relaxed qualifications, the Streamline Refinance also welcomes significant financial benefits for service members and veterans. With it, qualified borrowers are able to get a lower interest rate, a lower monthly mortgage payment, or both. They can also move from an adjustable-rate loan to a fixed-rate loan, making monthly payments more stable over a period of time.
However, if a borrower wishes to cash out from a Streamline VA Refinance, it cannot be done. For that, he/she may have to opt for the second type of VA loans refinance available, i.e., VA Cash-out Refinance.
VA Cash-out Refinance
A VA cash-out refinance allows current or veteran military service members to replace their current mortgage with a Department of Veterans Affairs' backed loan. VA backed refinance loan allows the borrowers an option to cash out of their home equity or refinance a non-VA loan into a VA-backed loan. Regardless of the existing mortgage being either a VA, FHA, or conventional loan, a qualified borrower can get a VA-backed cash-out refinancing.
Although similar to the VA Streamline Refinance loan, the VA Cash-out Refinance loan too is a no-down-payment loan, yet it has comparatively more stringent requirements.
Unlike the IRRRL, a cash-out loan follows the business rule. Cash allotted to the borrower is determined by evaluating the current appraised value of the property.
The home that is being refinanced is required to be the primary residence of the borrower. Furthermore, the borrower must supply their most recent paycheck stubs, W2 forms, and two years’ federal tax returns to the VA lender to allow the lender to check their credit and debt-to-income ratio.
Other than this, myriad fees are required to be paid in this process, such as the loan origination fee, fees for appraisal, title insurance, taxes, and finally, VA funding fees that add to the closing costs for a VA cash-out refinance.
Nevertheless, given the current economic condition and financial stresses due to the corona-virus outbreak VA refinance programs provide not only significant financial benefits to millions of veterans, service members, and military families but also help many of them achieve the dream of home ownership.
