The department of Veteran Affairs (VA) offers some of the nation’s heroes home loan refinancing at special rates, allowing veterans to refinance their existing VA loan, and lower the interest on it. This will lower the monthly mortgage payment and allow veterans to make their income stretch further in these challenging times. There are many elements involved in getting an interest rate reduction refinance loan and veterans are advised to consider several lenders because the terms and conditions will vary.

As a general rule no appraisal or credit underwriting packages are required to complete the application for VA loans. The process to be eligible for an interest rate reduction refinance loan is not too complicated; however it can only be used to refinance a property on which there is already a valid VA loan. The new loan is based on the original eligibility of the VA loan, so the veteran must prove that they have previously occupied the home. There is a clause which states that no loan other than an existing VA loan can be paid from the proceeds of an interest rate reduction refinance loan and the VA loan must be the first mortgage. The veteran does not need to get a new Certificate of Eligibility and the existing certificate can be shown to the lender as proof of prior entitlement. If a Certificate of Eligibility is not available, an email confirmation of the veteran’s eligibility can be obtained from the Department of Veteran Affairs.

There is no set limit on how much can be borrowed, but there is a limit on the amount of liability the VA can assume, and this will determine how much the lender will agree to advance. Loan limits vary by location and the value of the home that is being refinanced. Lenders will usually approve up to four times the available entitlement without requiring a down payment, however this will often require the veteran to be income and credit approved.

There is a requirement that veterans who are currently using the VA Home Loan Gratuity Benefit pay a funding fee to reduce the cost of the loan for taxpayers. This funding fee is a percentage of the total loan amount, and is calculated based on the type of loan sought, the military category of the veteran, whether it is a first-time loan user or not and whether a down payment was made. The funding fee must be paid by closing, and it can be paid in cash or by other financing options. The only veterans that are exempt from this fee are ones receiving compensation for a service connected disability, those who would be entitled to receive compensation for a service connected disability if they had not received retirement or active duty pay or the surviving spouse of a veteran who died in service.

Obtaining a VA interest rate reduction refinance loan is not a complicated process and it is a great option for veterans to consider because paying less interest makes great financial sense for anyone who does meet the eligibility requirements.