Can I Get a VA Purchase Loan, Then Turn Around & Get a VA Refinance Loan

By David Rouse

One benefit of serving in the Armed Forces is the Veterans Affairs (VA) home loan guarantee program. This program guarantees a lender against losses when it provides a home loan to veterans who have met VA home loan guidelines. VA is not only for purchasing a home, VA loan may be used to refinance a home as well. VA does not require a homeowner stay in her current mortgage for a certain number of payments before allowing her to refinance.

VA requires that homeowners obtain an appraisal each time a home receives new financing. Sometimes veterans buy homes for well under their appraised value. Perhaps they purchased the home from a family member, through a foreclosure or simply negotiated a fantastic deal for themselves. VA determines the value by using the lesser of the purchase price or the appraised value. Lenders typically require the homeowner to use the same guideline when refinancing a home purchased in the last six to 12 months.

VA offers three different types of refinance programs. The standard rate-and- term refinance requires the veteran fully prove his ability to repay the mortgage, provide a satisfactory credit rating and document the home's value. VA also offers a cash-out refinance program, which allows veterans to access some of the equity in their home. The Interest Rate Reduction Refinance Loan (IRRRL) allows veterans who currently have a VA loan to refinance into another VA loan without all of the qualifications required with a rate-and-term refinance. The veteran must prove she made all of the payments on time in the last 12 months and as long as the new mortgage balance does not exceed the previous loan's maximum balance, no appraisal or proof of income is required.

VA typically allows homeowners to borrow up to 100 percent of the home's value when purchasing or refinancing a mortgage. VA also allows homeowners to finance energy efficient improvements, discount points and the VA funding fee in addition to the full loan amount required. Often this takes the loan amount above 100 percent of the home's value. A new refinance of a recently closed VA mortgage may require that the homeowner bring money to closing since the current loan's balance may already exceed 100 percent of the home's value.

Lenders must underwrite VA mortgages to the minimum qualification requirements set by VA. The agency provides the lenders that offer this program a guarantee that the loan will be repaid if the home falls into foreclosure. Lenders may add additional qualifications to a VA loan which exceed VA's requirements. They may even restrict refinance transactions of recently closed a VA loans. It's always wise to contact several lenders when refinancing, regardless of loan type, when you just purchase the home.

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