Military personnel, veterans, and qualified spouses have plenty of great options for financing a home loan. For instance, if you fall under any of these categories, you can refinance your mortgage into a VA home loan.
It’s easy to meet the criteria for a refinance—for example, if you’ve completed 90 days of active duty military service during a named conflict, you become eligible for a VA loan. If you have six years of service in the National Guard or 181 consecutive days of active duty during times of peace, you could also qualify. A military spouse whose husband or wife suffered a service-related disability or died in the line of duty can also qualify for a VA loan.
Besides these, you must also have a credit score of at least 620 and show sufficient income for repaying the loans. Despite having these conditions, it’s still easier to meet VA loan guidelines for approval, and there are several benefits to taking this kind of loan.
Why Should I Refinance into a VA Loan?
Switching to VA home loans is popular among qualified individuals because of the many benefits it brings. First of all, a VA loan does not require a down payment. Other government-backed loans, like the FHA home loan, need a down payment of at least 3.5 percent.
Also, a VA home loan does not have PMI or private mortgage insurance, which adds .05 to one percent of the mortgage amount every year until you have a 20 percent equity. What you have with this type of loan is a funding fee, paid upfront, which you can wrap into the closing costs of refinancing your VA loan.
Interest rates on VA loans are also lower than conventional ones. With this type of loan, there is a limit on closing costs and no prepayment penalties, so you can pay in advance without worrying about penalties or hidden charges.
Refinancing into a VA Loan: What to Know
Typically, people have two options available to them when they refinance into VA home loans. They can opt for cash-out refinancing or IRRRL. Do your research before deciding—different refinance options are suitable for different goals. Let’s take a closer look at each.
Interest Rate Reduction Refinance Loan
The IRRRL or Interest Rate Reduction Refinance Loan allows you to refinance an existing VA loan into a new one with a lower interest rate. It is available to qualified individuals without the need for credit underwriting or appraisals.
You can also include your closing costs in the new loan product. It is a good option if you want a lower monthly payment, but you cannot get cash out from your equity if you use an IRRRL to refinance a current VA loan.
Cash-Out Refinancing
This type of loan allows you to refinance existing VA or conventional loans. With a VA cash-out refinance, you can gain access to equity immediately—up to 100 percent of the home’s value. You can use this money to pay off debt, remodel your home, do repairs, and much more.
Conclusion
If you’re eligible for one, you should refinance to a VA loan. This type of loan enables you to save money and limit closing costs without a down payment. Now’s the time to explore your options and refinance loans—interest rates are approaching record lows, and it’s good to take advantage of this while it’s available.
For easy lending done right, consult Pennix Mortgage. We provide VA loan refinance services in Cumming, GA, helping clients find the best loans at the lowest rates. Contact us today for more information!
