The VA streamline refinance program, also known as the IRRRL, is designed for veterans who have a VA loan and want to refinance it and reduce their interest rates. Qualified veterans and active-duty military personnel are snatching up Interest Rate Reduction Refinancing Loans (VA IRRRL) because they usually lower their monthly principal and interest payments.
VA Streamline Refinance Guidelines
To qualify for the VA streamline refinance program, the borrower does not need to meet a minimum credit score target or get an appraisal. This means that many borrowers can do a VA streamline even if their homes are underwater and have no equity. Even more generously, the VA does not even require borrowers to go through credit underwriting or income verification. However, borrowers considering a VA streamline should confirm this with their lender. While the VA’s standards are quite lax, some borrowers impose additional conditions.
In an attempt to keep refinancing affordable for veterans, the Veterans Administration regulates the closing costs that IRRRL lenders can charge. In fact, the only fee that the VA requires is a 0.5 percent funding fee, which can be rolled into the loan. Any other fees are imposed by the lender and are technically optional.
The VA Streamline program (VA IRRL Program) is actually easier to qualify for than an initial VA mortgage. Streamlines do not require a Certificate of Eligibility, since the borrower’s original VA loan serves as de facto proof of their eligibility for VA financing. In addition, veterans and service people can use a VA streamline loan to refinance VA loans on homes that they no longer occupy. This is more liberal than a VA purchase mortgage which has an initial occupancy requirement.
VA streamline refinance rates vary depending on the lender, where you are borrowing money and the length of your loan. That being said, since VA loans carry a strong government guarantee they typically offer some of the lowest rates in the mortgage market. As long as you choose a good lender, you can expect to get the best interest rate possible in the market.
Applying for a VA Streamline Refinance
You can apply for the VA IRRRL from any VA streamline refinance lender you prefer. You do not have to use your current lender. Because you do not want to be kept in the dark when you are calling to inquire about your application status or other things you may need clarified about the IRRRL refinance, you should choose a reputable lender with a good reputation for customer service. One of the best ways to get a good VA streamline loan is to talk to a couple of lenders and compare their rates, terms, and service commitments.
The best no cost streamline VA refinance lenders do not have extra administrative charges or hidden charges for them to process your application. Many of them will verify your eligibility online within a few minutes and make the process easy for you. They can also roll all of the costs into the loan, letting you close your streamline without bringing cash to the closing.
Streamline Refinance Flexibility
While you cannot use a VA streamline mortgage to pull cash out of your home, it is more liberal than other refinance programs that fix your balance and do not let you borrow any additional cash. First of all, you can usually time your refinance to let you skip one or two mortgage payments. This puts more cash in your pocket. In addition, you can either roll your closing costs into your loan and accept a slightly higher rate or finance your closing costs, keeping your rate low but potentially increasing your loan balance. The VA even lets you borrow an additional $6,000 as a part of your streamline as long as you spend it on energy efficiency upgrades to your home.
A VA IRRRL will not let you refinance a second mortgage, though. Other than energy efficiency upgrades and financed closing costs, the VA will not lend money to do anything other than pay off your other VA mortgage. If you have a second mortgage then a lender will need to sign a subordination agreement. The agreement keeps them in second position behind your streamline refinance loan in the event that you default and go into foreclosure.
VA streamline refinances typically offer fixed interest rates for 15, 20, 25 or 30 years. This flexibility makes it easy for you to choose the right IRRRL rate for you. While most borrowers use a streamline loan to reduce their monthly payments, you can also use it to refinance to a loan with a shorter payback time. While your payments might go up a little bit, you will also be paying your loan off more quickly. Doing this will also save you a great deal of money over the life of your loan.
With the ability to refinance any VA mortgage and reduce its interest rates, the VA streamline loan is a gift that America gives the heroic men and women that serve it. If you are eligible for a VA streamline refinance, contact a lender today to find out if it is right for you and, if so, how much money you could save.
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