Applying for a home loan is becoming difficult with every passing year. Banks and other financial institutions are becoming increasingly skeptical before lending money to borrowers. Fortunately, for veteran borrowers, there is a veteran refinance scheme that allows refinancing of current VA mortgages. VA loans are issued by banks or mortgage companies but are guaranteed by the US Department of Veterans Affairs.

Read on to know more about the application process of the veteran refinance option.

Application Process

• Step 1 – Understanding VA refinance loans
  There are two types of veterans refinance loans – Interest Rate Reduction Refinance Loan (IRRRL) and Cash-Out Refinance Loan.

• Step 2 – Determine refinance loan type you need
  You need to determine the type of VA refinances loan that suits you best. Both loan types have their advantages and disadvantages. Research them carefully and decide which loan type works best for you.

• Step 3 – Qualify for VA refinance
  You need to get in touch with VA loan financial institution and get pre-qualified. The loan specialist will guide you about the best type of loan best as per your requirements and inform you if you qualify or not.

• Step 4 – Loan application
  Once you are pre-qualified for VA refinance scheme, you have to fill out an application form and provide a list of required documents.

• Step 5 – Close your loan
  After the bank or lender receive the loan application with documents, they will process the application. Post loan approval, the documents need to be signed at an attorney’s office. The loan amount will be deposited in your existing loan account.

VA refinance loan rates
Since VA loans are guaranteed by the Federal Government, banks or credit unions are not allowed to charge a high rate of interest. The refinance loan rates are comparatively lower than VA loans and other conventional home loans. But keep in mind that the US Government does not set the interest rates. It is entirely in the hands of the lender.

• 15 year – Fixed Rate of Interest (IRRRL)
  Interest Rate – 2.375%; APR – 2.673%
• 30 Year – Fixed Rate of Interest (IRRRL)
  Interest Rate – 2.750%; APR – 2.903%
• 15 year – Fixed Rate of Interest (Cash-Out Refinance)
  Interest Rate – 2.375%; APR – 2.922%
• 30 Year – Fixed Rate of Interest (Cash-Out refinance)
  Interest Rate – 2.750%; APR – 3.040%

Please note that these rates are subject to change based on current market conditions.

Eligibility
The eligibility criteria for VA refinance scheme are similar to regular VA loans. The following eligibility criteria need to be met to qualify for VA refinance.

• One should have served more than 90 days during wartime and 180 days or more during peacetime.
• If you are a National Guard, you must have served a minimum of 6 years.
• Spouses of deceased veterans or having some forms of disability are eligible for this option
• Applicant should have an existing VA loan to apply for IRRRL
• Proof of stay in the financed property.
• Properties bought for investment purposes are not eligible for VA refinance

Tips to prepare for VA refinance

• Check your credit score
  Though VA loans do not require a high credit score, yet financers will look at your credit score to make important decisions regarding your loan. Check your credit score for any errors.

• Pre-qualify
  Banks have their pre-qualifiers. However, by looking at your financial situation, you can also determine whether you qualify to apply or not. Check for pre-qualifiers with banks as well before you go house hunting.

• Interest rate
  VA refinance loans are usually fixed-rate loans. However, it is always better to double-check the interest rate offered.

There are numerous advantages of availing of the VA refinance scheme. Undoubtedly, it can offer substantial savings on your monthly payments and reduce the overall cost of the loan.