VA loans are one of the best financial benefits available to veterans. They have many benefits, including no down payment, flexible underwriting guidelines and no mortgage insurance.
Millions of veterans use the program. But sometimes, a conventional loan makes more sense for veteran borrowers.
If you’ve already got a VA loan, you may want to switch to a conventional loan.
How does that work? And when does it make sense?
This guide will walk you through how to refinance a VA loan to a conventional loan and when it makes sense to do it.
CAN I REFINANCE MY VA LOAN TO A CONVENTIONAL LOAN?
Yes, refinancing a VA loan to a conventional loan is possible.
But here’s the thing:
When asking yourself can I combine a VA loan with a conventional loan, remember…
It only makes sense in certain situations.
Before we get into that, let’s look at how to qualify.
Conventional loans have stricter guidelines. You typically need a higher credit score, lower debt-to-income (DTI) ratio, stable income and employment.
Now, what about the reverse?
If you already have a conventional loan, can you refinance your conventional loan to a VA loan?
It’s not common, but you can.
FIND OUT IF REFINANCING IS RIGHT FOR YOU
Before you decide to refinance it is important to consider all the factors from the small details to the big picture. If you chose the wrong time it can cost you money, time and some sanity.
The Wendy Thompson Team is here to help you make the right choice for your family.
SHOULD I REFINANCE VA LOAN TO CONVENTIONAL LOAN?
If you have a VA loan, you might be wondering should I refinance a VA loan to a conventional loan.
There’s a lot to consider.
First, consider your finances. Can you afford the conventional loan?
If you don’t have at least 20% of equity in a conventional loan, you’ll pay private mortgage insurance (PMI).
And that may increase your payment, so make sure it’s affordable.
Next, look at your credit score.
Lenders typically require a higher credit score for a conventional loan.
You’ll usually need a score of at least 660. However, some lenders may still approve your loan with a lower score, but you may end up with a higher interest rate.
Finally, look at the rates.
If interest rates dropped, it might make sense to refinance a VA loan to a conventional loan.
It doesn’t have to be a drastic difference.
A rate that’s just 0.25% lower can save you thousands of dollars over the life of the loan.
REASONS TO CONSIDER REFINANCING A VA LOAN TO CONVENTIONAL
If you qualify to refinance a VA loan to conventional, next think about if it makes sense. Here are a few common reasons our borrowers choose to do it:
- Renting out your home: A VA loan isn’t usually used to purchase income property because it requires the owner to occupy the residence. Converting to a conventional loan removes that stipulation.
- Getting better terms: VA loans can sometimes offer the most competitive interest rates, especially if you had a credit score that was on the low side. If you’ve improved your situation and have great credit now, you may qualify for even better terms on a conventional loan.
- Not eligible for a VA IRRRL. The VA IRRRL is a great program to take advantage of lower rates, but not every veteran is eligible. If you have multiple loans, you may not qualify. Refinancing to a conventional loan might be your only option to get a lower interest rate.
HOW TO REFINANCE A VA LOAN TO A CONVENTIONAL LOAN
The Wendy Thompson Team makes it easier than ever to refinance a VA loan to a conventional loan. Here’s how.
1. Make sure you have some equity
Lenders may not require you to have 20% equity in your home, but it can help. Otherwise, you’ll be forced to pay PMI, which can add up to $100 or more to your monthly mortgage payment. If you’re not sure about your home’s value, we can help you get an estimate, so you know where you stand.
2. Check your credit score
Your credit score is a substantial factor when getting a new loan. Higher scores can unlock the most competitive rates. Check your credit history for free at AnnualCreditReport.com, and try to fix any credit issues before you apply.
3. Lower your DTI ratio
You’ll need a low-to-average debt-to-income ratio. Lenders like DTI to be around 36% for the lowest rates, but you may qualify with a ratio slightly higher, too.
4. Shop around
Once you’ve maximized your qualifying factors, shop around for the best loan. Want to get prequalified? We can help. The Wendy Thompson Team is here to help you secure the best rates and terms on your VA loan to conventional loan refinance.
5. Process and close the loan
Once you’ve chosen a refinance option, it’s time to apply for the refinance loan. Lenders will ask for your financial information and a formal home value appraisal. To speed up the process, use a reputable lender. We know what lenders want when processing your refinance application and can help you get to closing faster.
ALTERNATIVE OPTIONS TO REFINANCE YOUR VA LOAN
How hard is it to refinance conventional to VA loan? Well, there are a few requirements.
But if you don’t qualify to refinance a VA loan to a conventional loan, don’t sweat it.
You have a few other options:
- VA streamline loan: If your goal is to lower your interest rate and save money, the VA streamline loan, or IRRRL, is a great program. You can take advantage of lower rates. Just make sure your credit history doesn’t show any late payments.
- VA cash-out refinance: If you want to tap into the equity in your home, the VA cash-out refinance is a great option. You may borrow up to 100% of the home’s value and still get competitive VA loan interest rates.
READY TO REFINANCE VA LOAN TO CONVENTIONAL?
If you’re ready to refinance a VA loan to a conventional loan, let the Wendy Thompson Team help.
We have many years of experience helping people just like you save money, tap into your home’s equity and get the mortgage financing you need.
Call us to get prequalified today!