How To Refinance Your Home With A VA Loan
When you refinance your current mortgage, you pay off your existing loan and replace it with a new loan. One of the most common reasons why homeowners choose to refinance their mortgages is to lower their interest rate and save money. However, you can also get a new type of loan (like a VA loan) or change the term of your existing loan when refinancing. Interested in refinancing your home with a VA loan? Here are some things to consider.
Refinancing With A VA Loan-Considerations
Check Your Eligibility
Before beginning the refinance process, you must be aware of the loan requirements. Your loan officer will conduct a thorough review of your financial situation. Still, it’s up to you to understand what information they need from you to determine whether or not you qualify for a VA refinance loan.
Minimum active-duty service requirements:
For service members
- If you’ve served for at least 90 continuous days (all at once, without a break in service), you meet the minimum active-duty service requirement.
The minimum active-duty service requirements depend on when you served.
Talk To A Lender Who Specializes In VA Loans
The best way to find a VA loan specialist is to ask around. Ask people who have refinanced with a VA loan or even family and friends who've done so. If you're unsure where to start, look for lenders specializing in VA loans that have been in business for some time, like MHS Lending.
Choose A Fixed Rate Or An Adjustable-Rate That Works For You
When you’re ready to apply for a VA loan, one of the first things to do is choose a fixed-rate or adjustable-rate mortgage. Fixed-rate loans are the most common but can also be more expensive than their adjustable counterparts. The interest rate on an adjustable-rate loan is based on an index such as LIBOR, which fluctuates and adjusts with changes in market conditions. The interest rate on a fixed-rate loan stays at one level for the life of your loan, so if rates fall over time (as they typically do), you won’t benefit from lower payments like those who had chosen an ARM option would enjoy.
Decide If You Want To Pay Closing Costs Or Roll Them Into The Loan
You can decide whether you want to pay the closing costs up front or roll them into your loan. Closing costs are one-time fees that you will have to pay at closing. They include origination fees and other charges for buying or refinancing your home.
The closing costs are usually between 2% and 5% of the total loan amount, depending on the lender and the type of loan chosen by the borrower. If a borrower decides not to roll their closing costs into their loan, they should expect to pay those upfront before closing occurs.
These fees are non-refundable once paid, meaning that if something causes a delay in your closing process (like if your appraisal comes back lower than expected), then those funds cannot be recouped by either party. You may also incur additional expenses such as title insurance in some states where it's required by law or appraisal fees if they need any further information from homeowners before issuing final approval on their VA loan request (which can vary wildly depending on what state they live within).
Get A Certificate Of Eligibility From The VA To Include With Your Application
What is a certificate of eligibility?
A certificate of eligibility is an official document from the US Department of Veterans Affairs that certifies that you are eligible for a VA home loan. To get one, you must prove that you qualify for a VA home loan through service in the armed forces and then apply to them for verification. If approved, they will send you your certificate, which will not expire.
Ask For A Loan Approval Timeline
You must check with your lender on how long it will take to get approved for a VA loan. This can take anywhere from 30 to 90 days, so you’ll want to start the process as quickly as possible.
You’ll also want to consider how long it will take for a VA-approved appraiser to assess the value of your home.
Refinance With A VA Loan
If you already have a VA loan, you can refinance your home anytime. The VA guarantees the loans of all veterans, and they offer some benefits that other types of loans don't have. Unlike most other mortgages, these loans are available to anyone who has served in the military. You can also refinance if you have bad credit and want an easier way to get financing for your home.
If you are interested in refinancing through a VA-backed loan, you can opt for a lower monthly payment or get cash out (equity) for home projects. Refinancing eligibility will depend on:
- Your income level (the more money coming in from whatever source, the better interest rates will be)
- Credit score(s)
- Home value (higher values mean lower monthly payments)
- Loan type (fixed rate vs. adjustable rate)
In conclusion, refinancing your home is a great way to pay off debt and lower monthly payments. You can also use cash from the loan to buy an investment property or put down on another house. If you’re looking for a loan with low-interest rates and no-money-down requirements, consider refinancing with a VA-backed loan today!
MHS Lending is an approved VA lender specializing in VA Home Loans.
Get started on your VA loan journey here.