When refinancing a VA loan, you aren’t making adjustments to an already-existing one. You’ll be required to fill a brand-new application, new title report, and additional paperwork that can be a hassle to complete if you have a lot on your plate. If you’re looking to undergo a mortgage refinance, consider the three different methods involving VA loans.
IRRRL and Streamline Refinancing
Referred to as the Interest Rate Reduction Refinance Loan or VA Streamline, and IRRRL requires less paperwork than most, which makes it a popular choice among veterans. You won’t even need to undergo an appraisal!
Through a VA Streamline, qualified borrowers adhere to lower refinance rates and need not present any proof of income. As such, you can say goodbye to the tedious process of obtaining W2 forms, tax returns, and paycheck stubs.
Additionally, you won’t need to pass on a credit report. Instead, your appointed lender must ensure that you made no more than one late payment within the previous 12 months of your application. Sometimes, vets will be asked to refinance out of an adjustable-rate loan and into one that is fixed. They cannot receive a cash-out.
A cash-out refinance replaces your existing loan with a VA loan, pulling out equity from the property in the form of cash. However, cash-out refinances are paperwork heavy, with applicants having to provide two years’ worth of tax returns to a VA lender.
To determine the amount of cash you can borrow, lenders must appraise the value of your property. Some cash loans amount up to 90% of the appraised value. If, for example, you have a loan amount of $100,000, and an appraisal value of $150,000, 90% of the amount will be $135,000. You can then lower closing costs with the difference between $135,000 and $100,000.
Conventional to VA Refinance
Unlike VA Streamlines, which only allows for a VA to VA Refinance transaction, VA loans can refinance other types of loans such as FHA and conventional mortgages. Though an uncommon route to take, homeowners may opt for a conventional to VA loan if their current property values aren’t in good shape.
Conventional loans allow for a refinance that is up to 90% of the property’s current value. If existing mortgage balances come in too close to a home’s value, borrowers can refinance into a VA loan instead of a conventional one.
Standard VA Refinances without a cash-out can allow loan amounts of up to 100% of a property’s value. If interest rates are low enough to match an existing conventional or FHA loan, you can refinance into a new VA mortgage.
If you’re on the fence about which of the three loan types can best suit your needs, contact a mortgage broker in Salt Lake City who can help you make an informed decision. Don’t let evaluating a refinance scare you—it only takes a few numbers.
If you’re a Salt Lake City veteran in search of your dream home, reach out to us at Frontline Financial! We can help you secure the best mortgage rates for a refinance and streamline the entire process—from applying to obtaining your house keys.