How Soon Can I Refinance a VA Loan?
Navigate VA loan refinance options, timing, and requirements. Secure a beneficial mortgage adjustment with our expert guide.
Refinancing a VA loan allows eligible homeowners to adjust their existing mortgage terms, potentially securing a lower interest rate, reducing monthly payments, or accessing home equity. Understanding timing requirements and eligibility criteria helps borrowers determine the most opportune time to pursue a refinance.
VA Loan Refinancing Options and Timing Requirements
The “how soon” question for refinancing a VA loan depends on the type of refinance being pursued. For an Interest Rate Reduction Refinance Loan (IRRRL), often called a “Streamline Refinance,” specific seasoning requirements apply. Borrowers must generally wait until 210 days have passed since the first payment due date on their original VA loan, and they must have made at least six consecutive monthly payments on that loan. This waiting period ensures a stable payment history.
The VA Cash-Out Refinance allows borrowers to access their home equity and has different timing considerations. While the VA does not set a specific seasoning period, most lenders require a certain number of on-time payments. A common lender requirement is at least six to twelve months of on-time payments on the current mortgage. Some lenders may also impose a 210-day waiting period from the first payment due date, similar to the IRRRL.
Key Eligibility for Refinancing
Beyond timing, several general eligibility requirements apply to VA loan refinancing. The property being refinanced must be the veteran’s primary residence. Borrowers must also have sufficient VA loan entitlement remaining for the refinance.
While the VA does not set a minimum credit score, individual lenders establish their own credit and income requirements to assess repayment ability. This often includes evaluating the borrower’s debt-to-income (DTI) ratio. A crucial requirement for all VA refinances is that the transaction must provide a “net tangible benefit” to the veteran, such as a lower interest rate, a reduced monthly payment, or conversion from an adjustable to a fixed-rate mortgage.
Preparing for Your Refinance Application
Gathering the necessary documents and information before applying helps streamline the refinance process. Lenders require financial documents such as recent pay stubs and W-2 forms from the last two years. If self-employed, tax returns for the past two years are needed.
Recent bank statements for checking, savings, retirement, and investment accounts are requested to verify liquid assets. Details about the property itself, including current mortgage statements, are important. While lenders can obtain the VA Certificate of Eligibility (COE) electronically, having it readily available assists with the application.
The Application and Closing Process
Once all necessary information is gathered, the formal application process begins. The first step involves finding a VA-approved lender experienced in VA refinances, as terms and fees can vary between institutions. After selecting a lender, the collected documents are submitted as part of the loan application.
The lender then conducts an underwriting review of the application and financial information to determine approval. For VA Cash-Out refinances, an appraisal is required to determine the property’s current value. However, for many IRRRLs, an appraisal is not necessary. The final stage involves signing closing documents and the disbursement of funds.