The U˳S˳ Veterans Affairs Administration has helped provide home loans for veterans since 1944˳ The program allows both veterans and active duty service members to get affordable mortgages that the VA guarantees to be repaid to lenders˳ The program has been expanded to include refinancing these loans, and certain qualifications apply˳
Use of VA Loan Eligibility
In order to qualify for a refinance loan through the VA, you must have used your eligibility for the initial home˳ In other words, it must be a VA loan to VA refinance˳ A new Certificate of Eligibility is not required˳ Your previous Certificate of Eligibility serves as proof of the use of your entitlement˳
Loan Limits
VA refinance loans are subject to certain loan limits as defined by the program˳ These limits cap the amount of liability for repayment required by the program˳ Each county determines the amount of loan limit˳ Generally, lenders will approve up to four times the basic entitlement amount of $36,000 for a home loan, without a down payment˳
Funding Fee
A funding fee is required for all those who apply for loans through the VA Guaranteed Loan Program˳ Payment of the fee is required at closing on the loan˳ You can either pay the funding fee in cash or roll it into the financing of the property˳ Funding fees can range from 0˳5 percent to 3˳3 percent˳ Funding fees for the second use of your eligibility are generally higher than the first use˳ Certain veterans with disabilities and surviving spouses are not required to pay a funding fee˳
Interest Rate Reduction Refinance Loan
The program allows refinancing up to 100 percent of the home’s value˳ Although credit checks and new appraisals are not required under the program, lenders may impose these requirements under their own rules˳ Unlike a VA Purchase Loan, you do not have to certify that you will occupy the home˳ You must only certify that you have previously occupied it˳ The IRRRL program cannot be used to pay off a second mortgage˳ Generally, the second mortgage must be approved˳ Your current mortgage payments must be up to date, with no more than one 30-day late payment within the past year˳
Cash-Out Refinance Loan
If you wish to take cash out of your home for medical costs, children’s college or home improvement costs, the VA offers a Cash-Out Refinancing Program that allows you to use your equity to finance these major expenses˳ The above qualifications apply similarly for these loans˳ You may also refinance as much as 100 percent of the value of the property˳ Unlike the IRRL loan, a credit report, income verification and property appraisal are required˳ You must also certify that you will occupy the home being refinanced˳
Certain costs associated with refinancing can increase the cost of the loan to a greater amount than the fair market value of the property˳ These costs can include state and local taxes, discount points and other closing costs˳ Applicants for refinancing should always take these additional costs into account when determining if refinancing their VA loan is a favorable idea˳
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