How Long Do You Have to Wait to Refinance a VA Loan?

Homeowners with a Department of Veterans Affairs (VA) loan often consider refinancing to improve their financial situation. Refinancing replaces an existing mortgage with a new one, potentially offering different terms, interest rates, or access to home equity. Understanding the specific timeframes and requirements is important when exploring VA loan refinancing, allowing veterans and eligible service members to manage their home financing more effectively.

The Minimum Waiting Period

A specific waiting period applies before a homeowner can refinance a VA loan. Homeowners must wait at least 210 days from the first payment due date of their original VA loan. They also need to have made at least six full monthly payments on that loan. The later of these two conditions must be met before proceeding with a refinance.

This waiting period ensures a stable payment history on the current mortgage. It is a requirement for both the VA Interest Rate Reduction Refinance Loan (IRRRL) and the VA Cash-Out Refinance. Lenders may have their own additional requirements that extend beyond the VA’s minimum.

Additional Eligibility Requirements

Beyond the minimum waiting period, several other criteria determine eligibility for a VA refinance. A history of timely mortgage payments is required, with lenders typically allowing no more than one 30-day late payment in the last 12 months. This demonstrates financial responsibility.

The property being refinanced must meet occupancy requirements, meaning it is or was the borrower’s primary residence. For a VA Cash-Out Refinance, the borrower must intend to occupy the property as their primary residence after closing. A VA IRRRL only requires certification that the borrower previously lived in the home.

Borrowers must also possess sufficient VA benefit entitlement to secure the new loan. Entitlement is the amount the VA guarantees to the lender, and it is a lifetime benefit that can be restored for subsequent use. While the VA does not set a minimum credit score, individual lenders have their own credit score and debt-to-income (DTI) ratio requirements, such as a credit score of 620 or higher and a DTI ratio not exceeding 41%.

Understanding VA Refinance Loan Types

Two primary types of VA refinance loans are available: the Interest Rate Reduction Refinance Loan (IRRRL) and the VA Cash-Out Refinance. The VA IRRRL, often called a “streamline” refinance, helps homeowners reduce their interest rate or convert an adjustable-rate mortgage to a fixed rate. This type of refinance involves less paperwork and does not require an appraisal, income verification, or credit underwriting.

The VA IRRRL does not allow borrowers to take cash out from their home equity; its purpose is solely to adjust the loan terms. There is a VA funding fee of 0.5% for an IRRRL, which can be rolled into the loan amount. This streamline option is exclusively for those who already have an existing VA-backed mortgage.

In contrast, the VA Cash-Out Refinance allows homeowners to tap into their home’s equity, providing cash for various purposes such as home improvements or debt consolidation. This option can also be used to refinance a non-VA loan into a VA-backed loan. A VA Cash-Out Refinance requires a new appraisal, stricter underwriting, and verification of income, credit, and assets, similar to a new home purchase loan.

While the VA allows borrowing up to 100% of the home’s value with a Cash-Out Refinance, lenders often cap the loan-to-value ratio at 90%. The funding fee for a VA Cash-Out Refinance is 2.15% for a first-time use and 3.3% for subsequent uses, which can also be financed into the loan. This type of refinance has more extensive requirements compared to the IRRRL.

The VA Refinance Application Process

Once eligibility criteria are met, the application process for a VA refinance involves several steps. Homeowners should first gather essential documents. These include their Certificate of Eligibility (COE), current mortgage statements, and recent income verification such as pay stubs or W-2 forms. For a VA Cash-Out Refinance, two years of tax returns may also be required, along with asset statements and a government-issued ID.

The next step involves working with a VA-approved lender to submit the application. The lender will review all submitted documents and may conduct a pre-qualification to assess initial suitability. For a VA Cash-Out Refinance, an appraisal will be ordered to determine the home’s current market value, which is a key factor in how much equity can be accessed.

Following the initial submission, the application moves to underwriting, where a financial professional evaluates the borrower’s creditworthiness, income stability, and the property’s value. This underwriting process takes a few weeks, ranging from three to six weeks, depending on the file’s complexity and lender volume. After successful underwriting, the loan proceeds to closing, where final documents are signed, and the new refinance loan is disbursed.