WHAT HOME OWNERS NEED TO KNOW ABOUT THE STREAMLINE REFINANCE VA LOAN
The Veteran’s Administration has many valuable loan programs to help members of the military and their families obtain affordable homes. This program is designed to offer approved lenders the ability to give members of the Armed Services and their families loans that are guaranteed by the government, so that offers can be made that have the best terms possible. One of the more often overlooked programs, however, has more to do with keeping homes affordable and giving existing home owners an opportunity to make the most of their ownership. This program is the Streamline Refinance program.
The Streamline Refinance loan is just one piece of the VA loan program. It is often referred to as simply a Streamline, but it’s more official name is the Interest Rate Reduction Refinance Loan, or IRRRL.
The VA Streamline loan is designed to be specifically a VA-to-VA refinance.
What makes VA loans so attractive for those that qualify is that it enables loans with no money down. The main qualification is that applicants must be active military personnel, or have served for a minimum number of years with an honorable discharge. Direct family members of qualifying personnel are also eligible for loans. While many of the features of the VA loans resemble those provided by the Federal Housing Authority’s FHA loans, the FHA offers low down payments, but VA has no money down loans. The FHA has easier to meet requirements than a conventional loan just as the VA does, but the VA also provides loans without a private mortgage insurance (PMI) requirement.
One of the most attractive things about a VA loan is the low interest. VA loans often have the very lowest interest rates on home loans available, often even better than FHA loans.
Eligibility for a VA loan includes at least 181 days of service, or 90 days during a war. Reserve and National Guard members are also eligible, but must serve at least six years. Family members of the Armed Services, Reserves and National Guard are eligible for VA loans if their spouse was killed in action.
In general, almost anyone serving in the military or with an honorable discharge is qualified to apply for a VA loan or Streamline refinance.
STREAMLINE REFINANCE FACTS
Streamline loans are designed to help existing VA homeowners get better interest rates when they are available. That is attractive enough, but in their design, they also have a simple platform that makes transitioning nearly painless.
While any loan application is going to involve some angst and annoying aspects, the Streamline loan cuts through the worst of it by eliminating paperwork and making use of existing information. VA home owners can apply for a streamline loan without filling out the mountain of paperwork that normally accompanies an application. They do not have to provide any additional proof for validation such as employment or income and there are no credit checks.
Most Streamline refinances do not require a new appraisal of the property either unless the loan is for an amount higher than the original appraisal. Getting an application started is fairly simple as well. Almost any lender can assist you in completing the process. VA Streamline loans close quickly as well. The low paperwork and no need to verify information means less work for the banks and lenders, and allows Streamline refinance loans to close within a month for most applicants.
As an added bonus, closing costs which can amount to several thousand dollars can be incorporated into the loan so no money is needed at closing. Many lenders will even reduce closing costs by lowering their charges or eliminating them altogether for the easy Streamline loan process.
Along with eligibility, VA Streamline loans have the additional requirements listed here:
• Current mortgage up-to-date with a maximum of one delinquency in the previous 12 month period
• Monthly payment from the new Streamline loan must be less than the original loan payment
• No cash-out options are allowed
• Home owner must occupy the property being refinanced
• Original loan must be a VA loan
VA CASH-OUT REFINANCE FACTS
While Streamline refinance loans do not allow home owners to take cash out of the new loan, there are options available from the VA for a cash-out refinance. The cash-out refinance loan from the VA allows new applicants to have an original conventional or a VA loan. This refinance loan gives home owners the ability to obtain a lower rate on their mortgage and get the cash value of that saved interest at the time of closing.
All the VA cash-out does is replace an existing loan, but the terms are renewed to the current interest levels. This can save home owners hundreds of dollars each month, especially now with interest rates in the low 3s. In many cases, borrowers can refinance up to 100% of the value of the home when they refinance with the VA cash-out loan.
Any loan program has cash-out refinance programs. They can be obtained from conventional lenders, the FHA, USDA loan programs as well as the VA. Veterans usually take advantage of VA cash-out loan programs due to the additional benefits the program offers that other similar non-VA programs do not such as an extended payment time, lower interest and fewer add-ons like PMI.
VA cash-out loans share some of the same restrictions like the requirement that a current mortgage be up-to-date with no more than 1 delinquency over the previous 12 month period and the home must be the primary residence of the applicant.
COMMON QUESTIONS ABOUT VA STREAMLINE REFINANCE LOANS
Do I need to provide the lender with a Certificate of Eligibility to obtain a Streamline loan?
No. Because the Streamline loan is a VA-to-VA loan, you will have already provided the COE to the lender when the original loan was created.
Does the VA establish the interest rates on Va loans?
No. Interest rates are set by banks at a national level. However, the VA provides the most attractive rates by giving veterans the lowest possible interest rates they are eligible for through the program.
Do I have to use the same lender to refinance a VA loan?
No. You can go to any lender to refinance your VA loan. It is a good idea to go to several lenders and get the best rates available. Even though the VA offers the lowest rate possible, in most cases, each bank has their own ‘best rate.’
Do I need to have my home re-appraised and credit history checked when I refinance my VA loan?
The VA does not require any additional information verification. When using the Streamline loan all of the information from the original loan is used to validate the application. However, it is a good idea to keep in mind that individual lenders may have their own requirements. It is another reason to check out the requirements of several lenders to get the best loan options.
Do I have to get a better interest rate to be qualified to refinance with the IRRRL program?
Not necessarily. Although it is the most likely way to save enough on the monthly payments, having a lot of equity in the home can also mean lower payments when refinancing. Switching from an ARM to a fixed rate may also provide plenty of savings opportunities and allow for the Streamline approval.
Can I get any cash back at the time of closing on a Streamline loan?
Yes, but there are some conditions. You can get up to $6,000 cash out of a Streamline refinance, but the money must be used for energy-efficiency improvements on the home. More importantly, the improvements must be made before closing. Borrowers must have completed the improvements within 90 days prior to the close of the loan. In some cases the borrower can also get old escrow funds reimbursed at closing as well.
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