How do I refinance using my Kentucky VA Home Loan?
You can use your Kentucky VA home loan benefit to refinance your existing VA home loan to a lower
interest rate, with little or no out-of-pocket cost. This is called an Interest Rate Reduction
Refinancing Loan (IRRRL), also known as a “rapid refinance” or a “streamline refinance.”
Generally, no appraisal, credit information, or underwriting is required for this refinancing
option, although some lenders may require an appraisal and credit report. The fees and
charges associated with the refinancing loan may be incorporated into the new VA loan.
Remember: The interest rate on the new loan must be lower than the rate on the old loan
(unless you refinance an adjustable-rate mortgage to a fixed-rate mortgage).
To receive an IRRRL, work with your lender to process your application. It’s generally a good
idea to compare several lenders’ rates first, as there may be large differences in the terms
they offer. Also, some lenders may contact you suggesting that they are the only lenders
with the authority to make IRRRLs, but according to VA, any lender can
make you an IRRRL.
An IRRRL can be done only if you have already used
your eligibility for a KentuckyVA loan on the property you intend to
refinance. If you have your Certificate of Eligibility, take it
to the lender to show your prior use of the entitlement.
The occupancy requirement for an IRRRL is different from that for
other VA loans. When you originally got your Kentucky VA loan, you certified
that you occupied or intended to occupy the home. For an IRRRL, you
need only certify that you previously occupied it.
The loan may not exceed the sum of the outstanding balance on the existing VA loan,
plus allowable fees and closing costs, including the funding fee.
What’s the Cash-out Refinance Option?
The Veterans’ Benefits Improvement Act of 2008 allows you to free up cash with a cash-out
refinance, a VA home loan refinance program in which you can cash-out on the equity you
have built up in your home. As an example, if you still owe $70,000 on your original loan, you
can refinance for a $90,000 loan, which gives you a cash-out of $20,000.
An appraisal is required and you must qualify for the loan. If you are refinancing for the first
time, VA charges a 2.15% funding fee for this program (2.15% of the total loan) which can be
rolled into the loan amount. If you refinance more than once, the funding fee is 3.3%.
There is no minimum amount of time that you must own your home, yet your home must have
sufficient equity to qualify for KEntuckyVA refinancing. Existing loans can be refinanced whether they
are in a current or delinquent status, but refinancing loans are subject to the same income
and credit requirements as regular home loans. As long as you have title to the property
you can refinance an assumed loan. Check with your lender as there are some additional
regulations concerning assumed loans.
Conventional to VA Refinance
If you do not have a KentuckyVA home loan but are eligible for one, you can refinance a subprime or
conventional mortgage for up to 100 percent of the value of the property. Usually you will be
charged a funding fee of around 2-3 percent (depending on the lender you choose) if you are
using your VA loan guarantee for the first time. Benefits to this type of refinancing are that
your new interest rate may be lower and you will have no monthly mortgage insurance or outof-
pocket closing costs.
Can I reuse my Kentucky VA Home Loan benefit?
The Kentucky VA home loan benefit can be reused if you have paid off your priorKentucky VA loan and sold the
property. In addition you may, on a one-time-only basis, be able to reuse or restore your
benefit eligibility if your prior VA loan has been paid in full and you still own the property.
In either case, to restore your eligibility, you must send a completed VA Form 26-1880 to your
VA Eligibility Center. (See VA Loan Documents Checklist Above.)
To prevent delays in processing, you should also include evidence that the prior loan has
been paid in full and, if applicable, the property disposed of. This evidence can be presented
in the form of a paid-in-full statement from the former lender, or a copy of the HUD-1
settlement statement completed in connection with a sale of the property or refinance of the
Depending on the circumstances, if you have already used a portion of your VA-guaranteed
amount (up to $89,912), and the used portion cannot be restored, any remaining portion of
your VA guarantee is available for use on another loan. You will have to ask your lender if your
remaining VA-guaranteed portion will be enough, or if you will need to make a down payment
to qualify for the loan. If you have a question about your specific case, contact VA.
What are the advantages of a Kentucky VA Home Loan?
The following is a quick list of reasons why a Kentucky VA loan may be your best option:
No down payment required
VA funding fee may be financed in the loan
VA Loans do not require perfect credit – there is no credit score cut-off
VA funding fees may be waived for veterans with VA rated service-connected
disabilities and surviving spouses of veterans with service-connected disabilities
Closing costs may be shared between the buyer and lender
Flexible mortgage types – fixed, hybrid and traditional ARMs
No mortgage insurance premiums – this is huge in today’s housing market
VA guarantied mortgages are assumable
No pre-payment penalties
Homes are inspected and appraised by VA prior to approval and/or during
VA can offer assistance to veteran borrowers in default due to temporary financial
Refinance and Interest Rate Reduction loans are available
All in all, the pros far outweigh the cons. And, considering there are very few “no-down
payment” mortgage options around that offer lower associated fees, using your VA home
loan benefit seems like a no-brainer – as long as the red tape doesn’t scare you.