Best VA Refinance Rates 2024

Current Mortgage Refinance Rates for December 2024

What is a Cash-Out Refinance?

With cash-out refinancing, you refinance your mortgage with a mortgage that is larger than the amount you still owe on the original mortgage and then you keep the difference. Cash-out refinancing differs from home equity loans in that you are actually taking out a new mortgage and not simply taking a loan off the equity you’ve built up on your property. 

One thing to keep in mind with cash-out refinancing is that you will still need to collect all the documentation you would for a mortgage, including proof that you can keep up with the payments.

Isn’t This Just a Home Equity Loan?

Many people confuse home equity loans and cash-out refinancing, because both deal with using your home equity to attain money from a lender. 

With a home equity loan (HEL) you are using the equity of your property, or part of it, as collateral for a loan. These loans are often referred to as a “second mortgage,” and entail the lender making a one-off payment to the borrower, whose equity shrinks in relation to the size of the loan. As the owner repays the loan—and the relevant interest and fees—the equity begins to increase. 

Because a home equity loan is secured by the property, they typically have lower interest rates than unsecured loans. 

Unlike a HEL, a cash-out refinance entails securing a new mortgage to cover more than the preexisting mortgage so that you can get the difference as a loan. The HEL, on the other hand, is taken out in addition to your existing mortgage.

Pros and Cons of Cash-Out Refinance 

A cash-out refinance can get you a large sum of cash that you can use as you please. This can be to consolidate outstanding, high interest debts under a single loan with a friendlier interest rate, or to pay for a family emergency or home renovations—it's up to you. 

Also, a cash-out refinance is usually easier to qualify for than other loans. You already own the property and have the collateral, so gaining approval shouldn't be too difficult.

Having said that, one con of cash-out refinances is that the process can be similar to attaining a standard mortgage, meaning you'll have to put together a wide range of documents relating to your taxes, salary, bank statements, and more. You may also face steep closing costs on the loan. In addition, if for some reason the value of your home—and thus your equity—take a hit, you could end up owing more than your house is worth down the road.

What is a VA loan?

VA home loans help active service members, veterans of the armed forces, and eligible family members, including surviving spouses, become homeowners. The VA (the Department of Veterans Affairs) does not offer mortgages directly but rather guarantees the loans are issued through private lenders. A VA loan can be a good alternative for those who qualify. Eligible borrowers should consider going this route, especially if their financial profile is less than stellar.

How do I know if I qualify for VA refinance rates?

VA loans are available to current service members and, in some cases, their spouses:

• Those currently serving in the military or veterans who were honorably discharged.
• This service must include at least 90 consecutive days of active service during wartime or at least 181 consecutive days of active service during peacetime. 
• Those having more than six years of National Guard or reservist service.
• The surviving spouse of a service member killed in the line of active duty might also be eligible. 

To obtain a VA loan, borrowers must present a VA certificate of eligibility (COE).

The Mortgage Industry and VA Mortgage Refinance Rates in 2024

The COVID-19 pandemic has impacted the home buying process in 2020 in several ways. 

• Interest rates are low, making the cost of borrowing for those who qualify for the best rates more affordable. This is partly due to the Federal Reserve’s actions to keep rates low and stimulate the economy.
• Many home sellers have taken their homes off the market for a variety of reasons. This, combined with slow growth in new homes, served to reduce the supply of available homes in some hot areas. 
• Even though interest rates are low, qualifying for a mortgage is more stringent for many borrowers due to the fact that several lenders have implemented more stringent borrower requirements as a reaction to the economic slowdown in the wake of the pandemic. 

How to choose the right VA lender with low rates?

Private lenders offer VA loans with the backing of a VA guarantee. That said, all lenders are not the same; some may be better than others for your situation. You will need to do your homework to find the best VA lender for your situation.

Different lenders may be best for borrowers with different situations or offer some specific benefits. Some lenders may be better for borrowers in certain conditions or offer a better experience for some borrowers. This might include:

• Veterans who might not qualify for a conventional loan due to blemished credit histories or other factors.
• Borrowers who prefer to do everything online. It’s vital to assess the level of customer service offered by the lender how the process works.

As with any type of loan, you will want to know:

• Since there is no down payment required with a VA loan, will the lender finance the loan amount you are looking for based on your overall borrower profile?
• The overall loan APR including any loan fees by the lender. These fees will vary based upon factors such as whether you make a down payment and the nature of your service in the military.
• Technically there is no minimum credit score for a VA loan, but lenders may charge a higher rate for borrowers with poor credit scores, generally below 620. This will vary by lender, and you will want to understand how each lender you are considering handles this.
• The loan terms. A shorter-term loan will result in less interest paid over the loan’s life but will also result in higher monthly payments. You will want to see what best fits your budget and your overall situation. 

Overall, are VA loans a focus and priority of the lender? Do they seem to welcome borrowers looking for VA loans? 

VA Loan FAQs

What does it cost?

While VA loans don’t require private mortgage insurance, if you put less than 20% down, you will need to pay a VA funding fee. This fee is a percentage of the amount borrowed and will vary based upon:

• The amount of your down payment, if any.
• Whether this is your first time obtaining a VA loan or if this is a subsequent application.

Additionally, your lender might charge for things like a credit check, VA appraisal fees, and any discount points you decide to pay on the mortgage, insurance, and other closing costs. This will vary by lender in some cases these costs can be rolled into the loan.

What do I need?

To apply for a VA loan, you will need to apply for a certificate of eligibility. There may be forms to complete, and active veterans will need a statement of service. Requirements may vary a bit for surviving spouses, National Guard, or Reservists. 

You will also need to prove that you will be living in the home you are trying to finance through a VA loan. These loans cannot be used to finance investment property.

Does my credit score matter?

The VA does not have a minimum credit score requirement. However, the private lenders through whom the loan will be made might have their own minimums. Borrowers with a credit score lower than 620 will want to look for a lender who will still make the loan and from whom that can still get a decent interest with a lower credit score. 

Can I use a co-signer?

If the active military or veteran is legally married, then their spouse can co-sign the loan. Two unmarried military members can also co-sign together with no adverse ramifications. A military member can also bring an unrelated non-military co-signer with one caveat. The VA guarantee on the loan is limited to the amount of the military member or veteran’s interest in the property. Note that not all lenders will allow this type of arrangement at all. 

Can I use a VA loan to finance investment property?

The rules prohibit the use of a VA loan to finance the purchase of an investment property. You also may not use a VA loan to finance a vacation home. 

Can I still qualify if I am active in the armed forces?

Borrowers who are still active military members, active in the National Guard, or active reservists can still qualify for a VA loan.