VA loans are unique and have occupancy requirements when purchasing a home. This is due to the fact that a VA loan is a benefit that is reserved for veterans, active military personnel and other specific groups. However, when it comes to refinancing a VA loan, homeowners will find that these occupancy requirements may be different depending on the type of VA refinance they choose.
There are two types of VA refinance – the regular VA refinance and the VA streamline refinance:
If a borrower chooses to receive cash back through a VA refinance, occupancy is a requirement. This means that the borrower is required and will certify that they will occupy the home.
A regular VA refinance is also used when moving from a non VA loan to a VA loan; such as refinancing from an FHA or conventional loan to a VA loan.
Both of these situations require credit underwriting which includes full documentation with income and debts taken into consideration. An appraisal of the property is also required.
VA streamline refinance – Interest Rate Reduction Refinance Loan (IRRRL)
The IRRRL is used when refinancing an existing VA loan – also known as a VA to VA refinance. The streamline refinance does not allow for cash out and, therefore, does not require a credit check. Required documentation is kept to a minimum and an appraisal of the property is also not needed.
With the IRRRL, the borrower must receive a tangible benefit from the new loan. This can be as a lower monthly mortgage payments, better interest rate or a move from an adjustable rate mortgage (ARM) to a fixed rate loan.
Further, this type of VA refinance does NOT require occupancy. The only requirement is that the borrower must certify that the home was previously their primary residence. With the IRRRL, the veteran no longer needs to occupy the home as the primary residence and can rent out the property. This makes it possible for the borrower to purchase a second home with a VA loan even though the original property is refinanced with a VA loan.
VA loans are different than other types of mortgages which is proven with the VA refinance. Borrowers have these options available to them and can take advantage of these benefits with the help from a knowledgeable VA lender. A lender who specializes in VA loans has the experience to show the borrower the different options available to them, as well as, the best possible VA loan, VA refinance and VA mortgage rate for them to obtain.
Are you ready to discuss a VA refinance loan with a National VA lender? Feel free at any time to contact me for more information about VA loans and your refinancing options.
My loan process was very easy and quick. Not to mention a great loan rate. I couldn't be happier!
Capt Sam T. - US Army
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