How to Apply for a VA Home Loan Refinance

Many consumers entitled to veterans' benefits are unaware that they can refinance their property with a VA home loan – even if it was first financed with a traditional mortgage. If you bought your home with a VA mortgage, you probably know how to apply for a VA home loan. For those who have not, or those who need a refresher course, here's how the process works.

Choose Your Weapon: What Kind of Refinance?

There are three types of VA home loan refinance: the Interest Rate Reduction Refinance Loan (IRRRL, also called the VA Streamline), the conventional-to-VA refinance, and the cash-out VA refinance. Here's a quick rundown of the differences:

VA Streamline Refinance Loan (IRRRL): This is available only to those who already have VA mortgages.

  • Re-use your Certificate of Eligibility (COE).
  • Pay a .5 percent funding fee.
  • No appraisal, income verification or credit underwriting required.
  • Loan costs can be wrapped into the new loan.
  • Occupancy not required.

Conventional-to-VA: This loan is for refinancing a non-government loan to a VA mortgage.

  • Obtain your COE (In most cases, the lender can get it through the VA's WebLGY system).
  • Pay a funding fee of 2.15 - 3.3 percent, depending on your status.
  • Refinancing is allowed to 100 percent of the property value.
  • Full underwriting package including income documentation, credit check and appraisal is required.
  • Loan costs can be wrapped into the new loan.
  • Occupancy as primary residence is required.

Cash-out Refinance: This involves refinancing to a larger mortgage and taking the difference in cash.

  • COE is required if current loan is not a VA mortgage.
  • A funding fee of 2.15 - 3.3 percent applies.
  • Full underwriting package including income documentation, credit check and appraisal is required.
  • Cash out to 100 percent of the property value is allowed.
  • Loan costs can be wrapped into the new loan.
  • Property must be your primary residence.

How to Apply for a VA Home Loan

Your application process depends on the type of VA refinance selected. For an IRRRL, you'll need to do little more than complete an application form (click here to see a sample mortgage application). The lender will almost certainly underwrite your refinance electronically, and you'll have a decision very quickly. With no appraisal or credit underwriting required, you should be able to close your loan shortly after receiving your approval.

For a conventional-to-VA or cash-out refinance, you'll provide a full underwriting package. In addition to completing the standard mortgage application, you'll need copies of income documentation like two most recent pay stubs and two years of W-2s, or two years of tax returns if you're self-employed or work on commission. Get copies of your last two months (or one quarter) of statements for bank, investment and retirement accounts. Provide all pages, even the blank one at the end. Include verification for any other income you want considered (Social Security, pension, disability, child support, etc.). If your credit contains derogatory items that require explanation, get that in order before applying (you can get your free credit score from LendingTree before applying).

Underwriting and Appraisal

For all but IRRRLs, your loan application will be underwritten, including a credit check and income verification. If you pass muster, you'll get credit approval, which means that your refinance can close as long as the property meets the VA's and lender's guidelines.

Appraisals for VA home loans must be completed by VA-approved appraisers, according to VA guidelines and on VA-approved forms. Your lender will take care of ordering the appraisal. Once the appraisal has been completed, an underwriter will review and (hopefully) approve it, and issue final loan approval to you. You can then close your VA refinance.

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