Other Options When Refinancing a Loan through the VA

Posted on February 27, 2008

The following is a guest post:

If you are a veteran who is looking to refinance a specific type of loan that does not fall under the typical VA refinancing categories, you may still be able to refinance. The VA has two main types of refinancing loans. These are The Interest Rate Reduction Refinancing Loan (IRRRL) which is used to get a lower interest rate than on your current loan, and the Cash Out Refinance Loan which is used to get cash out of the equity in your home. However, the VA does offer other options for those veterans who are trying to refinance different types of loans.

The other types of loans that the VA also refinances include:

* Assumed Loans. Mortgage loans that were assumed by a veteran when purchasing a home can be refinanced with the VA. Usually a mortgage is assumed at purchase because it is at a prime interest rate which is lower than the buyer could obtain by getting their own financing. In some cases the interest rate a buyer thinks they are getting is inaccurate and they end up paying a higher rate. The VA allows veterans who have assumed mortgages from a purchase to refinance into a lower interest rate through the VA. However, if the veteran has allowed someone else to assume a mortgage from them that has a VA Home Loan Guarantee with it, then they are not eligible to refinance.

* Construction Loans. Veterans can refinance a construction loan through the VA. Some people get construction loans to build a home while they try to sell their own home or may tie into a high rate when they first get a construction loan and want to refinance when they are ready to move into the home. The VA does allow construction loans to be refinanced at a lower interest rate.

* Land Contracts. If you are a veteran who has a loan and are paying to purchase land through a installment land sale contract you can refinance with the VA. A land contract is when you agree to purchase land for a specified price and basically pay a mortgage on the land until you have paid that price and own it. Many people do this when they are planning to build a home and purchase the land first in order to keep their mortgage payment down when they eventually build. The VA will refinance land contracts for veterans.

It is important to know that these loans are offered by the VA, but are similar to other VA refinancing loans. They are like Cash Out Loans in their requirements, but the borrower can not take cash out at closing and the maximum amount allowed for their loan is different.

To refinance any VA loan you must also pass the application process from the VA approved lender. The VA can help make it easier to get a loan by giving the lender a partial guarantee, but the veteran still has to follow the guidelines and application process.

Another important fact to know is that the amount due on the previous loan, the fees, the closing costs, and any costs associated with energy efficient home improvements are eligible to be financed into the loan as long as it does not go above the maximum loan amount.

For more information on alternative VA refinancing loans go to www.va.gov

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