VA offers 3 different refinance loans to Veterans. The first and most common is the VA IRRRL (interest rate reduction refinance loan). The IRRRL is a streamline refinance loan that, like its FHA counterpart, allows the borrower to refinance without having to go through the whole mortgage process. The IRRRL is designed to let the Veteran take advantage of lower rates or better terms without having to have the home appraised. The IRRRL does not look at the Veteran’s income, Credit Scores or Assets. The IRRRL only looks at the last 12 month payment history of the mortgage. VA funding fee for a IRRRL is .5% of the loan amount which is added on top of the loan. It may be waived for a disabled Veteran. VA IRRRL loans are available for property that are current primary residences, 2nd home and investment properties. Please remember the current loan must be a VA loan in order to take advantage of the VA IRRRL.
Once a Veteran has a VA loan, they should always track what rates are doing. With the IRRRL Veterans can refinance with a low cost loan and take advantage of lower rates. Many homeowners believe it is not smart to refinance unless you are saving it least 1 point off the rate. This is NOT correct and homeowner should first talk to an experienced loan officer to find out what the needed savings are to make a refinance worth doing.
Another VA refinance loan is used to take cash out up to 100% of the value of the Veteran’s home value. Veterans can also use this loan to shorten their term of the VA loan. This VA loan requires full underwriting and an appraisal to be done on the property. Since VA rates are a little lower than FHA or Conventional, Veterans more often take advantage of VA Cash Out loans over Conventional and FHA loans.
For Veterans who put 5% and 10% down, there are lower funding Fees for both purchase and refinances. Reserves and National Guard have different Funding Fees also.