VA Refinancing Loans
The VA Lender’s Handbook describes two basic types of VA refinancing loans. One is the VA Interest Rate Reduction Refinancing Loan, which features no money back to the buyer and can be done in “streamline” mode for those who already have VA mortgages (under the right conditions). Another is the VA Cash-Out Refinancing Loan, which as the name implies does feature cash back to the borrower, requires a new credit check and other underwriting requirements.
But the Department of Veterans Affairs also has rules for “other refinancing loans”, which are described in Chapter 16 of the VA Lender’s Handbook.
According to Chapter 16, these additional VA refinancing loans are for construction loans, installment land sale contracts, and mortgage loans “assumed by veterans at interest rates higher than that for the proposed refinance.”
The maximum loan amounts on these types of refinancing loans is the lesser of either the appraised value of the home (as assigned by a VA-assigned fee appraiser) plus the VA loan funding fee, or “the sum of the outstanding balance of the loan to be refinanced plus allowable closing costs (including the funding fee) and discounts.” For these types of VA refinancing loans, the Energy Efficient Mortgage option is also available.
VA loan rules add that the maximum VA loan guaranty for these “other” refinancing loans is $36,000.
Some borrowers may have additional questions on these refinancing loans, but it’s best to contact the lender or the VA directly in such cases, as the Department of Veterans Affairs has published only a very short section in the VA Lender’s Handbook describing these loans. In fact, the information presented here is the sum total of the data available on such loans–in many cases the answers to a borrower’s question may already be answered by VA loan policy.
VA minimum property requirements and/or appraisal rules, for example, would be no different for these types of refinancing loans than for similar IRRRL or Cash-Out Refinancing loans. For some types of refinancing, appraisals may be optional under VA loan rules, but the lender requires them anyway. In others an appraisal may not be optional at all. Contact the VA or your lender for more information on your specific circumstances.