VA Refinance

Refinancing a VA home loan is an option available to borrowers in two basic ways: cash-out refinancing and Interest Rate Reduction Refinancing Loans, also known as the VA IRRRL or VA Streamline loan.

These two types of VA refinancing loans are very different. Which one is most appropriate depends on the borrower’s circumstances and financial needs.

One basic difference between the cash-out refinancing loan and the VA Interest Rate Reduction Refinancing Loan is occupancy--VA loan rules for occupancy apply for cash-out refinancing, but VA IRRRLs require only that the borrower certify he or she previously used the home as the primary residence during the original VA loan.

VA IRRRLs do not require a new loan application, according to VA loan rules, unless certain circumstances are met. Those include the following statements from Chapter Six of the VA Lender’s Handbook:

“No credit information or underwriting is required unless:

·  the loan to be refinanced is 30 days or more past due (see section 2 of this chapter) or,
·  the monthly payment (PITI) will increase 20 percent or more.”

The VA adds that any borrower with a Chapter 13 bankruptcy “may need approval of the trustee for the new loan.”

VA Cash-Out Refinancing loans are quite different. These loans always require a new application, credit check and other underwriting. This is due in part because the borrower can take cash out on the loan. The original mortgage is paid off by the new loan and any amount of money left over may be taken in cash.

IRRRL borrowers cannot do this; the primary function of a VA IRRRL is to lower the borrower’s interest rates and/or monthly payments.

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Newport Beach, CA

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