January 7, 2022
Who is Eligible for a VA Refinance?
If you’re a military veteran (any branch), including the Reserves, or the National Guard, you may be eligible for a VA refinance. How much time you served, the type of discharge you had, and the type of loan you carry now determines if you’re eligible for a VA refinance.
To be eligible for any VA home loan benefits, you must meet the following requirements:
- Served at least 90 days during wartime
- Served at least 180 days during peacetime
- Have any discharge except dishonorable
- Be a surviving spouse of a veteran who lost their life in the line of duty
- Served in the Reserves or National Guard for at least 6 years
- Have a current VA loan if you want to use the VA IRRRL program
If you already have a VA home loan, chances are you are eligible for a VA refinance and quite possibly both the Streamline refinance and a cash-out refinance. But if you didn’t use your VA benefits to buy your home, you may only be eligible for a VA cash-out refinance as it’s a requirement to have a current VA loan to use the VA streamline program.
The VA cash-out refi has the most lenient requirements for VA refinance options. You don’t need a VA loan currently to be eligible. As long as you have entitlement for a VA loan, you may be able to use the VA cash-out refinance option.
As is the case with any cash-out refinance, you must have equity in your home to use the VA cash-out refinance option. Unlike most loan programs, though, you can borrow up to 100% of the home’s value if you prove you can afford it.
Veterans who didn’t use their VA home loan benefits initially often turn to the VA cash-out refinance when they want to tap into their home’s equity because of the simpler requirements and the ability to use up to 100% of the home’s equity.
Keep in mind that eligibility and qualifying for a VA cash-out refinance are two different things, though. Even if you’re eligible, it doesn’t mean you automatically qualify for the loan. You must prove you meet the minimum requirements to afford the loan, meet the lender’s credit score requirements, and have manageable debts.
To be eligible for the VA streamline refinance, also known as the Interest Rate Reduction Refinance Loan (IRRRL), there are different requirements than the VA cash-out refinance program.
First, you must already have a VA loan. If you haven’t used your VA benefit yet, you need a VA cash-out refinance. But, if you have a VA loan now and only want to refinance to lower your payment, secure a lower rate, or change your loan’s term, you may be eligible for an IRRRL if you meet these requirements:
- You have a VA loan
- You can prove there’s a net tangible benefit to refinance
- You have an on-time payment history on your current VA loan for the last 12 months
- You can prove you lived in the home with a VA loan as your primary residence (or currently live there)
One of the nice things about the IRRRL program is you don’t have to live in the property as your primary residence after refinancing if you can prove you lived there full-time previously. Some borrowers use this option to buy another home with their remaining VA benefit while keeping the current VA loan on their first home.
Another benefit of the VA IRRRL program is that depending on the lender, you may not need to verify your credit score, income, assets, or home value. The lender may be able to use your qualifying factors from your original loan to qualify you for the IRRRL program.
A big part of using the VA IRRRL program is proving you benefit from the refinance. No two borrowers have the same benefits, but here are a few reasons you may be eligible:
- You can afford a shorter term
- You’re refinancing from an ARM loan to a fixed-rate
- You can eliminate mortgage insurance
- You can lower your interest rate
- The new loan will save you money monthly
- The new loan is 90% or less of the value of your home
To use your VA home loan benefits, you need your Certificate of Eligibility or COE. This is what shows lenders you are eligible for veteran benefits.
To get your COE, you’ll need your discharge papers or statement of service. With this information, you can apply for your COE using the VA’s web portal, or you can apply by mail.
If you’re a surviving spouse, use these instructions to apply for the COE.
VA Loans Spouse Requirements
If you’re a surviving spouse, you may be eligible for your spouse’s VA home loan benefit if any of the following apply to your spouse:
- Missing in action
- Died while in service or because of an injury caused in the service
- Was totally disabled and died, but not necessarily from the disability
In any case, you cannot be remarried to use your deceased spouse’s home loan benefits.
If you’re eligible for a VA refinance, it can be one of the best ways to make the most of the investment in your home. Whether you use the program to lower your interest rate and save money or tap into your home’s equity and slightly increase your loan amount, VA loans have many benefits.
A VA loan can be an attractive option if you’re a vet or member of the Reserves/National Guard. The loans typically have low-interest rates and fees, making it easier to afford a refinance loan and make the most of the investment in your home.