What is a VA Mortgage loan? 

A VA mortgage loan is a mortgage that is available to eligible American veterans or their surviving spouse provided that they have not remarried. The U.S. Department of Veterans Affairs, more commonly referred to as the VA, does not issue mortgage loans itself, but rather approves lenders to issue mortgage loans that are underwritten based on VA guidelines. Mortgage loans that are underwritten to these guidelines are then guaranteed against potential loss by the VA.

What types of VA refinance mortgages are available? 

There are two types of mortgage refinance available per VA guidelines: VA cash-out refinance, and VA IRRRL (Interest Rate Reduction Refinance Loan) refinance. Each of these is outlined below.

VA Cash-Out Refinance

The VA cash out refinance is for homeowners that are looking to refinance their existing mortgage while also converting some of the existing equity in the home into cash.

VA Cash –Out Refinance Basics

There must be an existing lien to pay off. Free and clear properties are not eligible.

Borrowers must be on title and on current lien to be eligible for cash out refinance.

VA funding fee for regular military is 2.3% for first time use and 3.6% for subsequent use.

VA funding fee for Reserves/National Guard is 2.40% for first time use and 3.30% for subsequent use.

VA Interest Rate Reduction Refinance Loan (IRRRL)

A VA IRRRL refinance is for homeowners whose property is currently secured by a VA mortgage and who would like to refinance in order to lower their interest rate.

VA IRRRL Basics

The interest rate on the new mortgage loan must be lower than the interest rate on the loan being refinanced.

The new total mortgage payment must decrease by the greater of $50 or 5%.

The borrower must have made all mortgage payments in the previous 12 months within the month that they were due at the time of application. If the current mortgage is less than 12 months old, a prior mortgage to show 12 months of payment history is required (rent payment rating is not acceptable).

Available for primary residence only.

VA funding fee is .50% of the loan amount.

The total loan amount (base loan amount including funding fee) cannot exceed 100% LTV.

Maximum loan term is the original loan term of the VA loan being refinanced plus 10 years, not to exceed 30 years and 32 days.

What are the benefits of VA refinance? 

Borrower up to 100% of your home’s current value

No monthly mortgage insurance

No pre-payment penalty

Typically interest rates are lower than those on conventional mortgage loans

Single Family Residences (SFR), 2-4 Family homes, and condos are all eligible property types

A variety of amortization options are available including 30 year fixed rate, 15 year fixed rate, and some ARM’s

No maximum income limits

What is the VA funding fee? 

The VA funding fee is an up-front fee that is charged by the VA in order for them to guarantee the mortgage loan. The funding fee varies based on a few different factors. Current VA funding fees are shown in the table below.

What is the maximum loan amount for a VA mortgage loan? 

The maximum loan amount for a VA mortgage loan in the state of Arizona is currently $417,000.

Do VA mortgage loans require mortgage insurance? 

No, there is no mortgage insurance requirement on VA mortgage loans.