VA mortgage loans are a program backed by the Federal Government to offer low-cost home loans to our nation’s veterans. The VA Streamline Refinance is a way for existing VA mortgage holders to take advantage of today’s low refinance rates with the agency’s Interest Rate Reduction Refinance Loan (IRRRL). Here’s what you need to know about VA Streamline Refinance and how it can lower your monthly payment and save you thousands of dollars.
VA Streamline Refinance Definition
VA mortgage loans are extremely attractive as they allow veterans to buy homes with zero money down without Private Mortgage Insurance (PMI). The term streamline refinance applies to FHA home loans and the HARP refinance for Fannie Mae & Freddie Mac; however, the VA’s Interest Rate Reduction Refinance Loan does the same thing.
If you don’t already have a VA home loan, in order to qualify you must have served in the armed forces or Coast Guard for 181 days during peacetime or six years in the Reserve or Guard. If you lost a spouse in the line of duty you may also qualify for a VA mortgage. If you served on active duty or in the Guard or Reserve you must have been honorably discharged to qualify for a VA purchase loan or a VA streamline refinance.
VA Interest Rate Reduction Refinance Loan
Qualifying for a VA Streamline Refinance allows you to lower your payment by taking advantage of today’s low mortgage refinancing rates. The streamline refinance process is extremely easy due to reduced paperwork and processing. If you’ve already got a VA home loan consulting a good mortgage broker can complete your Interest Rate Reduction Refinance Loan in under a month.
Your closing costs from a VA streamline Refinance can be rolled into the cost of your mortgage allowing you to close without paying out-of-pocket. It is also possible to have your closing costs and origination fee paid by accepting higher refinance rates from Yield Spread Premium. Just make sure the lender and broker aren’t gouging you on the fees you’re paying to close.
VA Streamline Refinance Requirements
As with any government refinance program there are requirements you must meet to qualify.
- You must be current on your payments
- You can have no more than one late payment during the past 12 months
- Your new payment must be lower unless you are refinancing your ARM
- Cash-out refinancing is not allowed
- Your home must be owner occupied
- You must already have a VA home loan on the property
The requirement for VA streamline refinance that you must already have a VA mortgage is often called VA to VA mortgage refinance. The IRRRL cannot be used by veterans that did not buy their homes with a VA mortgage loan.
VA Cash-Out Refinancing Is Possible
There is another program that allows veterans to cash-out equity in their homes while refinancing. The VA cash-out refinance works on any conventional or VA mortgage loan and allows you to borrow against equity in your home. The VA cash-out refinance does not work like a home equity loan but replaces your existing home loan. If you qualify you can refinance for up to 100% of your home’s value; however, you should probably think twice before doing this as you’ll quickly find yourself underwater in today’s economy.
The advantage of the VA cash-out refinance is that it works with any mortgage. Conventional, FHA, even USDA home loans are eligible meaning if you didn’t use your VA home loan to purchase you can use it to refinance. VA home loans generally come with lower interest rates than FHA home loans and do not require Private Mortgage Insurance like the FHA.
Additional VA Streamline Refinance Facts
If you used a VA mortgage loan to buy your home you will not need to get a new Certificate of Eligibility (COE) to qualify for your Streamline Refinance. You should note that the VA does not regulate interest rates for veterans under the VA mortgage program; they only insure the loan against default.
VA refinance rates are controlled by banks and lenders; shopping for the lowest interest rates and fees is important regardless of what government refinance program you’re using. You are not required to stick with your existing lender for either VA refinance program.
Lenders are not required to check your credit or have you pay for an appraisal as part of the VA streamline process; however, lenders are free to set their own requirements to qualify. Don’t be surprised if your lender pulls your credit or asks for a new appraisal on your property.
If you’re underwater in your existing VA mortgage it is still possible to qualify for an Interest Rate Reduction Refinance Loan although you may have trouble finding a lender to approve your application. VA home loans are not eligible for refinancing under the Home Affordable Refinance Program (HARP 2.0 & HARP 3.0).
If you’re eligible the VA Streamline Refinance is one of the best government refinance programs available. The main advantage is that VA home loans do not require Private Mortgage Insurance (PMI) which could save you thousands of dollars. Mortgage refinance rates are at their lowest levels in history so there is no better time to take advantage of your veteran’s benefits.
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