Those new to the homebuying market here in California may wonder why you occasionally hear…
There are several reasons why you might want to refinance your mortgage and replace your current home loan with a new one. You can do so to lower your interest rate or use the new loan to take advantage of the equity you’ve built in your home. Maybe you want to switch to a loan you can pay off faster or one with a better fixed rate. Whatever your reasons, there are plenty of potential benefits to refinancing. And there are some particularly useful refinancing options for people eligible for home loans backed by the US Department of Veterans Affairs. So let’s go over what those options are and how you can use them for a California VA refinance.
What is VA Home Loan Refinancing
We’ve touted the many upsides of getting a VA home loan before, as well as explained who’s eligible and just how simple the process of getting one can be. And refinancing your VA loan—or refinancing to a VA loan—is pretty straightforward. That said, there are different types of VA refinances, and you need to know what they are and, specifically, what it takes to get them.
Options for Refinancing
There are two types of home loan refinances offered by the VA to eligible veterans. An Interest Rate Reduction Refinance Loan—often referred to as an IRRRL and pronounced “earl”—and a Cash-Out Refinance Loan. Each has its uses and benefits, but the vast majority of military vets are eligible for either depending on their wants and needs.
A VA IRRRL is for people who already have a VA home loan and want to improve their monthly payments. Whether your goal is to lower the interest rate or switch it to fixed instead of adjustable, an Interest Rate Reduction Refinance Loan can get you a new, upgraded VA loan to replace your current one. And it’s such an incredibly easy process, you may find yourself shocked at just how quickly we can get it done!
VA IRRRL Eligibility
If you already have a VA home loan, you’re almost certainly eligible for a VA IRRRL. In fact, the criteria for eligibility is as simple as this:
- Already having a VA home loan.
- Intent to use the IRRRL to refinance that VA home loan.
- Proof that you either currently live or used to live in the home.
- If the home in question has a second mortgage on it, the holder of that loan has to okay the replacement of the first mortgage with the IRRRL.
How to Get a VA IRRRL
The steps to getting an Interest Rate Reduction Refinance Loan through the VA home loan program is quite similar to the process it took to get your initial loan.
- Find a lender: As with a regular California VA loan, you need to find a mortgage lender. Whether it’s a bank, a credit union, or other mortgage providers, they’ll be the ones actually providing the loan. The VA just guarantees a portion of it.
- Provide your Certificate of Eligibility (COE): If you’ve already got a VA home loan, then you already have a COE. If you have a physical copy, you’ll need to show it to your lender. If you no longer have it, don’t worry. The lender can get a digital copy directly from the VA. And if you chose New Way as your lender, we can handle this process with no sweat.
- Follow your lender’s instructions: With your eligibility taken care of, the lender has it from here. And we here at New Way, with our experience and expertise, know exactly what it takes for you to close on your new VA IRRRL and help you through the process.
- Pay any closing costs: There will likely be a pretty standard closing fee as well as a VA funding fee. And there may be some additional interest and fees, all of which can be rolled into the new loan if you don’t feel like paying those costs at once.
VA Cash-Out Refinance Loan
Whereas an IRRRL is designed to improve your monthly rate, you may have different goals and decide on a VA Cash-Out Refinance Loan. For those with existing California VA home loans, it can be used to take cash out of your home equity to pay off debts, do some home improvements, or make another large purchase. And for eligible veterans who have non-VA-backed home loans, this can be used to switch over to a VA home loan.
VA Cash-Out Refinance Loan Eligibility
Regardless of what your plans for this kind of VA refinance are, the eligibility requirements are the same:
- Either already have or be eligible to acquire a Certificate of Eligibility.
- Meet both the VA and the lender’s standards of income, credit, etc.
- Already live in or plan on living in the home being refinanced.
How to Get a VA Cash-Out Refinance Loan
The process of getting your VA Cash-Out Refinance Loan can be slightly more complex than getting an IRRRL, though it is still quite similar to the initial VA loan process.
- Find a lender: The same first step as an IRRRL or any other kind of VA home loan.
- Apply for a COE: If you’re getting a Cash-Out Refinance Loan when you already have a VA home loan, this step is unnecessary. But if you’re applying to change from a regular home loan to a VA backed one, you’ll need to apply for your COE.
- Give your lender the required information: In addition to your COE—once you have it—you’ll need to provide your lender with your most recent monthly paycheck stub, two years’ worth of W-2’s, and your federal income tax returns for the last two years. Your specific lender may require other documents as well, but with New Way Mortgage handling things we’ll tell you exactly what we need from you to get your new loan.
- Follow your lender’s instructions and get them any requested information quickly.
- Pay any closing fees.
Taking Care of Your California VA Refinance
Whether you already have a VA home loan or not, any eligible veterans can take advantage of these two great options for mortgage refinancing. You can use these California VA refinance options to improve your home loan and make it work for you, whether you need to take money out, lower your rates, or switch to a VA home loan. And here at New Way Mortgage, we would be happy to help you through the process of getting a new VA loan to fit your financial goals.