VA Streamline Refinancing and Marital Status

If you already have an existing VA loan and are interested in refinancing, there is no better time than now. Interest rates are low, and since you already have a VA loan you can apply for a VA Interest Rate Reduction Refinancing Loan (IRRRL) also known as VA Streamline refinancing because of simple process involved. However, if there is a change in your marital status (whether you are getting married or divorced) there are some things you need to be aware of.

When you apply for a VA IRRRL, one of the benefits is the relative ease it is approved compared to the refinancing of other loans. There is no additional paperwork, out-of-pocket fees, background checks, etc. This is because everyone on the loan has already been approved by the VA, so there is no need for further checks.

If you need to remove a borrower from the loan, you will have to reapply for a brand new VA loan. This is because the entire status of the loan changes, so you will be required to provide full documentation for the loan with a credit check, debt ratio, income verification, etc. You will still be qualified for a VA IRRRL but it will require a little more paperwork than if you kept the original borrowers on the loan.

If you have recently divorced and want to refinance the loan, you will need to make proper arrangements with your spouse as to the status of the loan. If you are letting your spouse keep the house, it might be a good idea to let them refinance with a traditional loan in their own name. Otherwise, you will not be eligible for another VA loan, even if they are paying the entire mortgage. In this case, you will have to wait until your non-military ex-spouse has refinanced the house with a traditional loan in their name until you are eligible for a new VA loan.

When refinancing with a new spouse or co-borrower, you will need to go through all the necessary steps with your loan officer first. Your new spouse will likely need to provide income statements, credit check, debt ratio, etc. before being approved on the VA IRRRL. Remember however, regardless of the status on your refinanced loan, you cannot use it to take out cash. If you’re interested in refinancing in order to take out equity, you will need to get a Cash-Out Refinance.

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