How Lenders Can Approach Appraisals and VA Refinance Loans

Appraisals on VA Refinance Loans

Some lenders can process a VA Streamline refinance without an appraisal. But prepare for a credit check.

We’ve seen some questions and confusion recently about appraisals and VA refinance loans. The uncertainty is usually because of that gray area between what the VA requires (or doesn’t) and what lenders want to see.

The VA has two major refinance options. There’s the Streamline, or the Interest Rate Reduction Refinance Loan (IRRRL), and the Cash-Out Refinance. The first one allows qualified homeowners with an existing VA mortgage to refinance into a lower interest rate. The latter allows qualified homeowners, regardless of their loan type, to refinance into a VA loan, snag a lower rate and extract cash from their equity.

Appraisals on Streamlines

The VA Streamline is meant to be just that — streamlined. The process is less involved than a VA purchase loan, especially if you obtain your Streamline from your original lender. The VA’s requirements regarding credit scores and appraisals for Streamlines are a bit looser as well. In fact, the VA doesn’t require a credit score check or an appraisal for a Streamline refinance.

But lenders in most cases want both. In the current lending environment, lenders want to see a score of at least 620 from prospective borrowers. The topic of appraisals can get trickier.

There are situations where a lender will process a Streamline without an appraisal. In some cases, it may depend on who your lender is on the original mortgage. Other times, a lender may be able to move forward without an appraisal if the borrower has some equity and the lender can find a financial instituion willing to purchase the loan in the secondary market.

So it’s accurate to say that some VA-lenders, including Veterans United, can process a Streamline refinance without an appraisal. But it really depends on your unique circumstances. And that’s why it’s always important to talk to a loan specialist who can dig into your personal situation. You can talk to a Veterans United loan specialist at 888-212-1958.

Appraisals on Cash-Out Refinance

This one is much simpler to parse. The VA requires a credit check and an appraisal on these refinance loans, which require the type of underwriting scrutiny that’s applied to VA purchase loans. The potential source of confusion here is whether a lender can refinance up to 100 percent of the loan or something less. Much like the Streamline appraisal issue, it depends on the lender.

Photo courtesy of Ron Cogswell