The US Department of Veterans Affairs has helped provide home loans to veterans since 1944. The program allows both veterans and active duty members to obtain affordable mortgages that are guaranteed by the Department of Veterans Affairs to be repaid to the lenders. The program has been expanded to include refinancing of these loans, and some qualifications apply.
Use VA loan eligibility
In order to qualify for a VA refinance loan, you must have used your eligibility for the initial home. In other words, a VA loan should be a VA refinance. A new Certificate of Eligibility is not required. Your previous Certificate of Eligibility serves as proof of use of your entitlement.
VA refinance loans are subject to certain loan limits as defined by the program. These limits cover the amount of liability required by the program. Each province sets the loan limit amount. Generally, lenders will agree to up to four times the principal maturity amount of $36,000 for a home loan, with no down payment.
A financing fee is required for all those who apply for loans through the VA Secured Loan Program. Fees must be paid when the loan is closed. You can either pay the finance fee in cash or transfer it to the property finance. Finance fees can range from 0.5 percent to 3.3 percent. Finance fees for a second use of your eligibility are generally higher than for a first use. Designated veterans and surviving spouses are not required to pay a financing fee.
Low interest rate refinance loan
The program allows for refinancing of up to 100 percent of the home’s value. Although credit checks and new appraisals are not required under the program, lenders may enforce these requirements under their own rules. Unlike a VA purchase loan, you don’t have to certify that you’ll be occupying the home. You just have to acknowledge that you have played it before. IRRRL cannot be used to pay off a second mortgage. In general, a second mortgage must be approved. Your current mortgage payments must be up to date, with no more than 30 days of late payments within the past year.
Cash refinancing loan
If you want to withdraw cash from your home for medical costs, children’s college costs, or home improvement, the VA offers a cash refinance program that allows you to use your principal to fund these major expenses. The above qualifications similarly apply to these loans. You can also refinance up to 100 percent of the property value. Unlike an IRRL loan, a credit report, income check, and property appraisal are required. You must also certify that you will occupy the home being refinanced.
Some of the costs associated with refinancing can increase the cost of the loan to an amount greater than the fair market value of the property. These costs can include state and local taxes, discount points, and other closing costs. Refinance applicants should always take these additional costs into account when determining whether refinancing a VA loan is a favorable idea.