Imagine choosing a lender to help you with your refinance. You go through the loan process believing you will be closing within 30 days. Then days before closing you find out your house didn't appraise high enough to do a refinance. You're out $400 for an appraisal you think you can't use and you've been led to believe there's nothing you can do but wait.
Hundreds of thousands of homeowners nationwide, not just veterans, have this problem every year. Most give up and rightly so. Because, if you aren't lucky enough to be a US military veteran then you may have no alternative than to wait. Veterans however have options with a new VA loan refinance.
Most veterans and military personnel want to take advantage of the lower interest rates VA loans offer but don't know they can get a new VA loan up to 100% of the value of their home. This is not referring to the VA Streamline refinance or "IRRRL". This type of loan is called a "Regular VA Refinance" and is much different than an IRRRL and can be much more beneficial as well.
A regular VA refinance or "Cash out VA Refinance" has much more flexibility than an IRRRL. You can only get an IRRRL if you currently have a VA loan. This is not a requirement for a regular VA refinance. If you are an eligible US military veteran or service member, you can refinance any mortgage loan you have into a new VA loan up to 100% of the value of your home. You can even pull out cash to pay off high interest debt or any other number of reasons you may have in order to take full advantage of tax benefits your home offers.
The significance of this is you're not limited to the strict guidelines of conventional loans nor do you have to pay the high monthly mortgage insurance premiums that FHA and Conventional Fannie Mae or Freddie Mac products require.
Here are some reasons you may want to obtain a regular VA refinance:
- Your current mortgage rate is significantly higher than VA rates are right now.
- Your Conventional mortgage requires a monthly mortgage insurance payment - Conventional Loans with less than 20% down require mortgage insurance. This is an added monthly cost that would be eliminated with a new VA loan.
- Your FHA Loan has a monthly mortgage insurance payment - Like a conventional loan, this can be eliminated with a new VA loan
- You have a high interest 2nd mortgage or adjustable home equity line of credit you would like to pay off and consolidate
- You have high interest debt and consolidation will benefit you by allowing you to make direct principal payments rather than spending hundreds of dollars in interest each month.
- Your home value has declined making FHA or conventional refinances unattainable - You can refinance up to 100% of the value of your home with a VA refinance and there is never any monthly mortgage insurance.
- You're looking to do home improvement and need to take advantage of ALL or most of your equity to do so
There may be many other reasons that are more specific and personal to your situation. The important thing is, if you're an eligible veteran or service member, you have options.
See also: VA refinance cash out limits