Facts and Falsehoods About VA Refinancing

The Department of Veterans Affairs offers a great deal of advice to first time homebuyers to help them navigate the process of buying a home with a VA mortgage. While the VA works with lenders and borrowers alike, the goal of the VA is decidedly pro-consumer, and the advice given by the government includes plenty of “buyer beware” strategies.

It’s easy to assume that just because a particular bank or lender is VA-approved to issue VA loans that all its employees are the most knowledgeable, scrupulous people available. But human nature being what it is, sometimes it takes a bit of time for the VA to catch up to individuals or banks that aren’t living up to the standards set by the VA.

Hence the VA’s warnings to those who want to apply for Interest Rate Reduction Refinancing Loans; according to the Department of Veterans Affairs, “Some lenders may contact you suggesting that they are the only lender with authority to make IRRRLs.  Remember - Any lender may make you an IRRRL.”

The VA doesn’t issue statements such as these without cause. “Let the buyer beware” applies to home loans the same as any other major investment. What are some of the other potential dangers on the market waiting for the unsuspecting or poorly educated VA refinancing applicant?

“Some lenders may say that VA requires certain closing costs to be charged and included in the loan.  Remember - The only cost required by VA is a funding fee of one-half of one percent of the loan amount which may be paid in cash or included in the loan.”

The bank may have its own perfectly legal fees that are included as part of the cost of doing business, but it’s dishonest to imply or state directly that the VA requires such fees. Such statements should make any well-informed VA loan applicant look elsewhere for VA refinancing loans.

Some myths are not spread by the lender at all, but still must be debunked, such as the misconception that any bank you apply to must agree to do business with you as a VA loan refinancing applicant.

According to the VA, “No lender is required to make you an IRRRL, however, any lender of your choice may process your application for an IRRRL.  While it might be the best place to start shopping for an IRRRL, you do not have to go to the lender you make your payments to now or to the lender from whom you originally obtained your VA Loan.”

A well-informed borrower goes into the world of VA refinancing with confidence, which is never a bad thing.