VA Loan Reader Questions: No-Credit Check Refinancing?
A reader asks, “Now I heard that when doing a refinance that there is no credit check, income verification, appraisal… is this true for VA loans?”
VA home loans can be refinanced in more than one way, but only one of those refinance options features a “no credit check” and “no appraisal” option–the VA Interest Rate Reduction Refinance Loan or IRRRL.
VA IRRRLs do not, under VA program guidelines, require additional underwriting or an appraisal. In the eyes of the Department of Veterans Affairs, the borrower has already qualified for the original VA home loan and that qualification is used to get the refinance loan rolling. That said, VA loan rules DO NOT forbid the lender from requiring a new credit check and appraisal.
Additionally, some circumstances may require a new credit check as mandated by VA regulations. A VA IRRRL is intended to lower a borrower’s interest rate and/or monthly mortgage payment. If either of these increases, VA rules may require additional underwriting depending on the circumstances. VA loan rules for IRRRLs are strict–there is no cash out to the borrower permitted under a VA IRRRL except for bona fide refunds of money paid up from that is later financed into the loan amount or otherwise covered.
A refund is not the same as “cash back” from loan proceeds and VA rules covers this distinction in detail.
It should be noted that VA IRRRLs are only for existing VA home loans–they cannot be used to refinance conventional mortgages. To do a conventional-to-VA refinance, discuss your options with a lender. These types of refinance loans are possible, but cannot be done under the VA IRRRL or Streamline Refinance program.
VA cash-out refinancing loans are another story. Any type of home loan may be refinanced under this program. A new credit check, appraisal, and other underwriting is required with these mortgage loans. Any loan that features cash back to the borrower will have some form of underwriting–the lender must determine the borrower is a good credit risk and negotiate an interest rate with the borrower.
VA refinance loans come with many options–speak to a loan officer or pre-qualify for a VA refinance loan to learn more. You can also contact the Department of Veterans Affairs for additional information on your VA refinance options.
Do you have questions about VA home loans or refinance loans? Ask us in the comments section.