How do I refinance with a VA loan?
Assuming you qualify for a VA-backed home loan (which can be confirmed by contacting the VA or simply obtaining a Certificate of Eligibility through a lender), there are decisions that must be made if you opt to use a VA loan. First and foremost: what kind of refinancing option are you wanting to pursue?
Cash-out refinancing refers to refinancing a mortgage into a mortgage with a higher total balance, but with the purpose of ‘cashing out’ the increase. A cash-out refinance will include a VA funding fee and lender underwriting (likely including an appraisal, credit check, etc.) Closing costs can, generally, be included in the new loan upon completion and the property being refinanced must be used as a primary residence.
Another option is an Interest Rate Reduction Refinance Loan (often abbreviated as IRRRL). These loans include a lesser funding fee than most other options, rarely require the full underwriting process regardless of lender, and allow for closing costs to be included in the finalization of the loan. Occupancy may not be required in such cases.
The final example of a common VA refinanced mortgage would be a conversion of a non-VA loan into a VA loan. Funding fees and full underwriting requirements do apply in these cases, but again: closing costs can be included in the finalization of the loan. The property must be used as a primary residence in order for this type of refinance.
The process of pursuing the refinancing itself is similar between most different lenders, but must be pursued through those lenders respectively. While the VA will provide documentation to support their backing of the loan in the form of a Certificate of Eligibility for qualitying veterans and service-members, the VA will not recommend a particular lender. Worth noting, though, is that veterans with a VA-rated service-connected disability of 10% or higher normally qualify for exemption from the funding fee portion of the VA loan. Documentation confirming this exemption will likely be required, but the cost-savings implied in such a rating are certainly worth claiming!