BLOWNMORTGAGE.COM LENDER HOTLINE: 888-581-5008 Refinancing your VA loan is a simple process if you are simply choosing to reduce your rate. This loan, called the Interest Rate Reduction Refinance Loan comes with very few requirements and very few closing costs. A VA cash out refinance, on the other hand, does have different requirements and a more intensive approval process. Understanding the difference can help you decide if it is worth taking the equity out of your home or simply reducing your interest rate to save even more money every month. The Streamline Refinance- The benefits of the streamline refinance are the very few requirements necessary to get approved. You will not be required to supply any income or employment documentation, nor will your credit be pulled. In addition, an appraisal is very rarely needed in this situation; the original appraised value is used to perform the refinance. The only requirements that you must abide by in a streamline refinance are the need to be current on your mortgage with no more than 1 30-day late in the last 12 months, demonstrate that the new mortgage will save you money every month and prove that the home is owner occupied. The VA Cash Out Refinance If you wish to tap into the equity in your home and refinance your VA loan, you will be subjected to different requirements. The main differences between a streamline refinance and the cash out refinance include: A new appraisal is required to determine the value of your home- 2 most recent paystubs to verify your monthly income will be needed- W2 forms and 1040s from the last two years’ taxes are needed to prove income consistency- Credit reports will be pulled for every borrower on the loan- Credit scores below 620 will generally not be considered for the cash out refinance, but some lenders require a credit score of at least 680. The Fees- Every VA loan has a funding fee. For a streamline refinance, the funding fee is 0.5% of the loan amount. This means that if you have a $200,000 loan amount, you will pay $1,000 funding fee in addition to various other closing fees. If you are taking cash out with your VA refinance, the funding fee increases to 2.15% of the loan amount, which raises the fee for the same loan amount to $4,300. The increase in fees is simply to protect the VA in the event that you default on your riskier, cash-out loan. In addition, if this is not your first cash-out refinance on this VA loan, your fee will increase to 3.3%. Lender Overlays- Despite the regulations that the VA sets in order to back-up the loans that it funds, various lenders can have their own overlays in addition to the Va’s requirements. The most notable area of difference is the credit score that is allowed for a cash out refinance on a VA loan. The VA requires a 620 credit score, which is considered a mediocre score. Most lenders will require a higher score in order to allow a cash-out refinance.

1. VA Cash Out Refinance:
How the Requirements
are Different
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2. Refinancing your VA loan is a simple process if you are
simply choosing to reduce your rate. This loan, called the
Interest Rate Reduction Refinance Loan comes with very
few requirements and very few closing costs. A VA cash out
refinance, on the other hand, does have different
requirements and a more intensive approval process.
Understanding the difference can help you decide if it is
worth taking the equity out of your home or simply reducing
your interest rate to save even more money every month.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

3. The Streamline Refinance
The benefits of the streamline refinance are the very few
requirements necessary to get approved. You will not be
required to supply any income or employment
documentation, nor will your credit be pulled. In addition, an
appraisal is very rarely needed in this situation; the original
appraised value is used to perform the refinance. The only
requirements that you must abide by in a streamline
refinance are the need to be current on your mortgage with
no more than 1 30-day late in the last 12 months,
demonstrate that the new mortgage will save you money
every month and prove that the home is owner occupied.
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

4. If you wish to tap into the equity in your home and
refinance your VA loan, you will be subjected to differen
requirements. The main differences between a
streamline refinance and the cash out refinance include
The VA Cash Out Refinance
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5. Credit scores below 620 will generally not be
considered for the cash out refinance, but some lenders
require a credit score of at least 680
Credit reports will be pulled for every borrower on the
loan
W2 forms and 1040s from the last two years’ taxes are
needed to prove income consistency
2 most recent paystubs to verify your monthly income
will be needed
A new appraisal is required to determine the value of
your home
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008

6. Every VA loan has a funding fee. For a streamline refinance, the
funding fee is 0.5% of the loan amount. This means that if you have
a $200,000 loan amount, you will pay $1,000 funding fee in
addition to various other closing fees. If you are taking cash out
with your VA refinance, the funding fee increases to 2.15% of the
loan amount, which raises the fee for the same loan amount to
$4,300. The increase in fees is simply to protect the VA in the
event that you default on your riskier, cash-out loan. In addition, if
this is not your first cash-out refinance on this VA loan, your fee will
increase to 3.3%.
The Fees
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LENDER HOTLINE: 888-581-5008

7. Lender Overlays
Despite the regulations that the VA sets in order to back-up
the loans that it funds, various lenders can have their own
overlays in addition to the Va’s requirements. The most
notable area of difference is the credit score that is allowed
for a cash out refinance on a VA loan. The VA requires a 620
credit score, which is considered a mediocre score. Most
lenders will require a higher score in order to allow a cash-out
refinance, especially if it will hit 100 percent loan-to-value
ratio, which is considered a rather risky loan. Other areas that
may differ include the debt-ratio that is allowed or the amount
of cash that you are able to obtain.
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LENDER HOTLINE: 888-581-5008

8. If you truly want to take cash out of your home with a VA
loan, it pays to shop around with various lenders. You will
likely not find two lenders that have the same requirements,
making it necessary for you to know what is available. Some
lenders will have very strict requirements, making it difficult
for you to get cash out above 80 percent loan-to-value ratio
while others will offer 100 percent LTV loans. Pay close
attention to the interest rates, fees charged and the
requirements to obtain the loan before deciding on a VA
cash-out refinance lender.
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LENDER HOTLINE: 888-581-5008

9. T O L E A R N M O R E
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C L IC K HE R E
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10. Justin McHood is Americas Mortgage
Commentator and has been providing
Mortgage commentary for over 10 years.
INFORMATION PROVIDED BY:
JUSTIN MCHOOD
MORTGAGE COMMENTATOR
Information Originally Published: January 29, 2015 BLOWNMORTGAGE.COM
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