The Department of Veteran Affairs (VA) helps on-duty defense personnel, veterans, and eligible surviving spouses to become homeowners by providing a home loan guarantee. Banks and mortgage companies give the VA home loans while VA guarantees a part of the loan, helping veterans get better terms. But, in some cases, individuals cannot meet the terms, requiring the option of refinancing. This article discusses steps via which veterans can avail refinancing on mortgages.

What is veteran refinancing?
If a person who has taken a VA loan falls behind in their mortgage payments, it could lead to foreclosure of the mortgage and they may lose their property. VA allows refinancing to help veterans shift to a mortgage with a lower interest and reduced monthly payments. This allows individuals to retain the house without worrying about foreclosure. Refinancing also allows the conversion of a non-VA loan into a VA home loan. The two most common veteran refinancing options are VA streamline refinance and cash-out VA refinance.

VA Interest Rate Reduction Refinance Loan (VA IRRRL) or VA streamline refinance
VA Interest Rate Reduction Refinance Loan (VA IRRRL) is available for veterans who have a VA home loan and want to reduce their monthly payments. VA IRRRL also helps convert an adjustable-rate mortgage (ARM) into a fixed-rate VA loan.

How to apply
Check for your eligibility for refinancing on the VA website and obtain the Certificate of Eligibility.

You can visit the VA website to apply for a VA IRRRL. Find a private bank, mortgage company, or credit union through VA. Submit the required information along with the COE. After this, you have to pay a one-time funding fee or add it to the loan cost. It may take about two months to close the loan.

Benefits of Streamline refinancing or VA IRRRL are:

• Refinancing of 100% of home value
• Reduced monthly loan payments
• Extension of the loan term
• Funding fee gets added to the loan amount
• Certificate of Eligibility requirement optional for specific instances

VA Cash-out refinance loan
If you have a non-VA loan and want to refinance it into a VA loan or take cash from your home equity, it is beneficial to consider a VA cash-out refinance loan. It allows you to replace your original loan with one that has more favorable terms.

It is vital that you fulfill VA’s and the lender’s credit scores and income requirements. One of the important requirements for a cash-out refinance loan is that the borrower must currently be living in the home they want to refinance. Verify the closing costs as they could be as high as 3% to 5% of the total loan amount. The closing costs are in addition to the funding fee.

How to apply

• You can apply for a VA cash-out refinance loan after 240 days of the first payment on your original loan.
• Check for your eligibility for refinance on the VA website and obtain COE to submit proof to the vendor.
• Choose a lender through VA. A borrower is eligible for about 90% of the appraisal cost.
• Along with the COE, you may also have to submit copies of the most recent paycheck stubs, W-2 forms for the previous two years, copies of your federal income tax returns and other information the lender may require.
• Pay the funding fee closing costs and close the cash-out refinance loan. A VA cash-out loan may take about two months to close.
• If you want a cash-out to refinance for a non-VA mortgage, you must have a VA loan entitlement that covers the new loan. You can find the VA loan entitlement on the COE. Lenders will finalize the loan based on the COE.

Benefits of VA cash-out refinance loan
Borrowers can use home equity for emergencies, home remodeling, or repair. It helps in the debt consolidation of auto loans, student loans, or high-interest personal loans. Additionally, it enables one to reduce monthly payments. A borrower can choose to reduce the interest rate and increase the loan term. One can also use the cash to settle high-interest debts and increase cash in hand.