May 24, 2017
There’s no doubt the VA home loan is one of the veteran’s
most valuable benefits. Being eligible for a VA home loan means getting a
mortgage that doesn’t require a down payment while still offering competitive
interest rates. That means coming to the closing table with as little money as
possible when buying a home and financing the purchase with a VA loan. Yet the
VA home loan also has benefits when the veteran decides to refinance. How so?
When the veteran decides to refinance an existing VA loan,
there are two distinct choices- a VA streamline refinance or a cash-out
refinance. A streamline refinance doesn’t require a credit score. Nor does the
streamline verify employment or income or even a property appraisal. As long as
the veteran is refinancing to a lower rate or refinancing out of a variable
rate loan into a fixed, the streamline is an option. However, what cannot occur
during a streamline is pulling out additional cash in the process. To tap into
the equity of the home while at the same time refinancing to a lower rate or
changing from a variable to a fixed, the cash out loan is the option, not the
streamline. Streamlines do not allow for extra cash to the borrowers at the
VA guidelines allow for borrowers to refinance up to 100% of
the current value of the property and pull out additional cash. Note however
that just because it’s okay with the VA individual lenders may place a cap on
the amount of cash pulled out or limit the loan amount compared to the
appraised value. A VA cash out loan must also document the application in very
much the same fashion as when the home was originally purchased. Buyers can
expect to provide documentation regarding income and assets, employment and
credit. An appraisal will also be ordered to establish current market value.
Say a couple decides to refinance their existing VA loan.
The current loan balance is $150,000 and the appraised value is $200,000. They
go to their closing, sign the papers and the old loan is paid off completely
and replacing it with a new loan. They pocket the net proceeds from the new
loan after closing costs are paid. If you’re considering refinancing your VA
loan and there is additional equity the property, a cash out loan is an option
and the proceeds can be used in any way you want.
For more information or questions about mortgage loans, please call (855) 757-8748.