Converting a Conventional Mortgage to a VA Loan
Individuals who qualify for a VA home loan, but do not currently have one, may choose to refinance their conventional loan to a VA loan. Refinancing a conventional loan to a VA loan will save the borrower money, among numerous other benefits.
Among the benefits of conventional to VA refinancing are no out-of-pocket closing costs, lower interest rates, no monthly mortgage insurance, and cash out up to 90% of the value of your home.
It is certainly beneficial for eligible individuals with a conventional mortgage to refinance to a VA mortgage loan. There is a minor drawback to this type of refinance - as opposed to a Streamline refinance (only available to those who currently have a VA Loan) - and that drawback is that prospective borrowers will have to go through standard credit and underwriting procedures, including a look at credit scores, debt-to-income ratio, a home appraisal, income verification and other key steps. Additionally, borrowers must pay the VA Funding Fee, but it can be rolled into the entire cost of the loan.
Individuals who are not eligible for a conventional to VA refinance may want to consider taking advantage of other types of refinance. Other refinance options include a VA streamline refinance, which will simply lower rates, and cash out refinance, which allows the borrower to take cash out once the home has built up equity.