As a member of the US military, you make great sacrifices for our country. In return, there are certain perks that you may be able to take advantage of, and that includes the VA Home Loan Program.
If you’re an eligible veteran refinancing in Washington, a VA refinance may offer advantages over a conventional refinance depending on your goals. This article is about refinancing an existing mortgage, not using a VA loan to buy a home, and the right option often depends on whether you want to lower your rate, change your loan terms, or tap home equity.
Many veteran homeowners today have conventional loans on their homes, while others already have VA loans and are considering a refinance. You may be one of those people.
Before comparing the numbered reasons below, it helps to separate the main refinance paths. A VA IRRRL, also called a streamline refinance, is only for refinancing an existing VA loan into another VA loan. A VA cash-out refinance lets you replace your current loan with a new one under different terms and may also let you take cash out, which is why it is often the VA option compared against a conventional refinance. If you’re eligible, comparing VA cash-out, VA IRRRL where applicable, and conventional refinance quotes side by side can help you see which option best fits your situation.
Even if you have plenty of equity in your home, you may still want to consider doing your refinance with a VA loan rather than a conventional loan, and there are many reasons why.
One of the biggest refinance advantages of a VA loan is that eligible borrowers may be able to move an existing mortgage into a VA-backed refinance rather than staying with a conventional loan. A VA-backed cash-out refinance loan lets you replace your current loan with a new one under different terms, which can make it a practical option if your current loan no longer fits your needs.
It is also important to know that not all VA refinances work the same way. An IRRRL is only available for refinancing a property on which you have already used your VA loan eligibility, so it is a VA-to-VA refinance only. If your current mortgage is conventional and you want to refinance into a VA loan, the path to compare is generally a VA cash-out refinance rather than an IRRRL.
As with any refinance, borrowers still need to qualify for the new loan. Lenders will still review factors such as credit, income, and the overall loan scenario before approving the refinance.
VA loan rates are often lower than comparable rates for a conventional loan, though pricing varies by borrower profile, lender, and market conditions. This is highly advantageous as a lower interest rate can reduce borrowing costs over the life of your loan. Even a fraction of a percent lower in interest can be a real money-saver. Depending on your qualifications, you may still find that a VA loan offers more favorable pricing than many conventional home loans.
Underwriting standards are more lenient for VA loans than for conventional loans. Specifically, for a veteran borrower with a lower credit score—let’s say 620 or even lower—conventional pricing may be affected more noticeably, so borrowers should compare VA and conventional quotes side by side.
If the homeowner wants to get cash from the home’s equity, VA will allow a loan for the full value of the home, while a conventional loan will be capped at 80% of the appraised value. That means you can access 100% of your home’s equity if you ever need extra cash for whatever reason.
Home equity loans can be used to cover the cost of any pressing expense you have rather than having to apply for a conventional loan. If you’re a homeowner, you already have an asset of value that can be used to collateralize a financing product in the form of a home equity loan.
VA cash-out refinance can be attractive because conventional cash-out refinances may carry additional pricing adjustments compared with no-cash-out refinances, with pricing varying by factors such as LTV and credit score. That does not necessarily mean there is no added borrower cost with a VA cash-out refinance overall.
A VA-backed cash-out refinance loan still replaces your current loan with a new one under different terms, so the right comparison is the full package: interest rate, lender fees, closing costs, and any VA-specific costs together. For example, VA-backed cash-out refinance loans can include a funding fee in addition to other refinance costs. Rather than isolating one pricing feature, compare the total cost of the VA option against the total cost of a conventional refinance.
Some people believe, mistakenly, that getting a VA mortgage is full of bureaucratic red tape, hassles, and delays. The Veterans Administration guarantees the loan, but lenders underwrite and fund VA mortgages according to VA guidelines. Depending on the borrower and lender, VA loans may still be easier to qualify for than conventional loans.
Related: How hard is it to get a VA loan?
There is, however, much more to a VA refinance than just knowing the benefits. In order to take advantage of the opportunity to refinance, download our free ebook and learn more about how to move your journey from idea to completion.
Check out our mortgage loan limit tool for conventional, FHA, and VA loans.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to explore your refinance options.
It can be a good idea when the new loan better fits your goals, such as lowering your interest rate, changing your loan term, or accessing equity. The best choice depends on your current loan type, your eligibility, and the total cost of the refinance.
A VA IRRRL, also called a streamline refinance, is only for refinancing an existing VA loan into another VA loan. A VA cash-out refinance replaces your current loan with a new VA-backed loan under different terms and may also let you take cash out, which is why it is commonly compared with a conventional refinance.
Yes. If you are an eligible veteran and your current mortgage is conventional, the VA refinance option to compare is generally a VA cash-out refinance rather than an IRRRL. As with any refinance, lender approval still depends on factors such as credit, income, and the overall loan scenario.
It may be, depending on your goals and qualifications. VA refinance loans often offer more flexibility for eligible veterans, may have lower rates than comparable conventional loans, and can be more forgiving on underwriting, but the right comparison is the full cost of the loan rather than one feature by itself.
They often do, but not in every case. Pricing varies by lender, market conditions, and borrower profile, so comparing VA and conventional refinance quotes side by side is the best way to see which option offers the better deal.
A refinance is not automatic. Lenders still review your credit, income, and the overall loan scenario before approving the new loan, and some VA refinance options also depend on the type of loan you currently have.
The content compares VA refinance benefits against conventional refinancing and does not describe monthly mortgage insurance as part of the VA refinance advantages discussed here. When comparing options, it is still important to review the full cost structure with your lender.
That depends on the type of refinance and the lender’s guidelines. The content notes that a VA cash-out refinance may allow borrowing up to the full value of the home, while a conventional cash-out refinance is described as being capped at 80% of the appraised value.
Compare the total package, including the interest rate, lender fees, closing costs, and any VA-specific costs. A VA-backed cash-out refinance can include a funding fee, so the best comparison is the total borrower cost rather than just one pricing feature.
Yes, eligible veterans in Washington may be able to refinance a conventional mortgage into a VA-backed loan through a VA cash-out refinance. It is smart to compare that option against a conventional refinance based on your rate, loan terms, equity goals, and overall costs.
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