How to Refinance a VA Home Loan

If you are a veteran who qualified for a VA home loan when you first purchased your house, you may be able to get special rates and terms that are not available to civilians when you want to refinance your home.

Special programs, such as the Interest Rate Reduction Refinance Loan (IRRRL), commonly referred to as a “Streamline” or “VA to VA” loan, allow eligible veterans to obtain the lowest fixed mortgage interest rates available, with little or no cost out-of-pocket. This program for American veterans is considered one of the most attractive loan programs available for refinancing, for several reasons.

VA Mortgage Rates

Traditionally, VA mortgage rates are the lowest fixed interest rates in the mortgage industry. However, VA home loans are only backed by the Department of Veterans Affairs (VA) — they’re originated by the same mortgage lenders that provide traditional mortgages and refinancing. That means you should obtain VA mortgage rate quotes from several lenders to determine which one has the most affordable offer.

Documentation Needed for a VA Mortgage Refinance

When you call your lender and request a refinance, you will need to provide documentation of your gross monthly income, including past pay stubs and federal tax returns, as well as statements for your bank accounts, credit cards and any other loans you own.

Avoiding Out of Pocket Closing Costs

There are two options for avoiding out-of-pocket costs when refinancing a VA home loan, and you can ask your lender which one is right for you. The first option is to accept a slightly higher interest rate, and let the lender pick up the closing costs.

The second option is to get the lower interest rate, which is generally the lowest rate available for U.S. veterans. If you choose this option, the closing costs will be rolled into the balance of the loan. You will eventually pay these costs back, but they will continue to accumulate interest over the life of the loan. This may be cost-effective in comparison to the first option, depending on how much you are borrowing for your VA mortgage refinance.

Keep in mind that the closing costs associated with a VA mortgage refinance may actually increase your monthly payment, even if the interest rate is lower. That’s why it’s important to do the math and ensure that refinancing your VA home loan is really worth it.

VA Mortgage Refinance and Credit Checks

It is almost unheard of for a lender to give you a mortgage with no credit check, but the VA streamline refinance is a rare exception to that rule. If the borrower has qualified for a VA-backed loan in the past, and has remained current on mortgage payments, the borrower will probably qualify for the mortgage with no credit check. However, while the VA does not require credit checks, it is always possible that the lender may choose to require one anyway, so ensure your credit is in tact just to be safe.