Tuesday, June 19, 2012

Can You Refinance Your VA Loan With Another VA Loan

By David Rouse

Veterans Affairs (VA) loans allow people to purchase a home with no money down. The VA does not require veterans only use their benefits to purchase homes; they may use their benefits to refinance a home as well. The first mortgage does not have to be a VA loan or any other specific type of loan to refinance into a VA loan, but it can be.

One refinance program unique to VA loans and only available to veterans who currently have a VA loan is the Interest Rate Reduction Refinance Loan (IRRRL) program. Under this program, the veteran does not have to purchase an appraisal or prove ability to repay the mortgage. This mortgage only allows the veteran to better his situation with either an interest rate reduction or a more conservative loan program. The new loan amount may not exceed the initial loan amount of the loan being refinanced. The veteran may not receive any funds from the mortgage other than reimbursement for costs actually paid, if any. The veteran may the roll closing costs into the cost of the loan, however.

VA allows veterans to pull cash out of their homes with a cash-out refinance. Cash-out refinances from VA must pay off debts other than the existing mortgage, pay for home improvements or be used for many other reasons. All debts being paid by the new cash-out refinance must be current. This includes taxes or judgments in addition to the mortgages. Unlike the IRRRL, this program requires an appraisal and for the borrower to fully qualify for the mortgage and meet all of the lenders and VA's underwriting guidelines.

VA loans require veterans pay a funding fee at closing. This funding fee may be paid in cash or financed into the loan amount. This funding fee varies depending on the amount of equity in the home, how many times the veteran has used the benefit and what type of loan the new refinance is. In addition, the veteran's service type also determines the fee amount. Active duty veterans pay a lower fee than do veterans of the reserves or National Guard. The fee is based on a percentage of the loan amount and not just a simple flat fee. The first time the veteran uses the benefit and refinances with less than 5 percent equity in the home requires a 1.50 percent funding fee if the borrower was active duty and 1.75 percent, if the veteran served in the reserves or National Guard.

Of course, veterans are not restricted to only refinancing with a VA loan. Veterans may choose any other loan program.


http://www.lenderva.com

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