Are you looking for information on VA streamline refinance guidelines? The internet can be a wonderful source of information, but it is also an overwhelming place. I did a quick search for ‘VA Loan Articles’ and there were almost six MILLION hits. I tried narrowing it down a bit and searched ‘VA loan refinance’… still over 2 million options. Third times a charm, right? ‘VA streamline refinance guidelines’ gives us 251,000 results. While that narrows things down a bit, it’s still more than anyone wants to look at.
So how do you know what your options are? How do you get started on a VA refinance? What do you need to be prepared?
I am not a licensed loan officer so I will leave the discussion on rates and program options to them, but I have been a loan officer assistant for over a year and have fielded a lot of questions about what is needed to get the loan process started.
First of all, let’s talk about VA streamline refinance guidelines. A VA streamline is going to be faster and less complex than a conventional loan. Typically we do not need pay stubs, tax returns, or appraisals. You don’t have to deal with contracts and lots of third party companies. Even though the list of things we need is significantly shorter, it’s important to remember that your loan officer and his or her team will only ask you for documents and information that is necessary. The faster you are able to get us the documents we need, the faster your loan will go through the system. A VA streamline refinance is still a refinance. There are a lot of details that have to be taken care of, but we do try to make it as quick and painless as possible.
VA Streamline Refinance Docs Required?
Application or Information Sheets
Proof of Social Security number and Date of Birth
Current Mortgage Statement
Home Owner’s Insurance
State specific documents
Non-participating Spouse full legal name
Many people look at that list and think, “Wait! I thought this was supposed to be a streamline?! You shouldn’t need all of this.” I know it seems like a lot, but remember how much shorter that list is than the one you had to go through with a purchase. Believe me; we want to keep it as simple as possible for you.
So…Why Do You Need to Send All Those Documents?
Let’s start with the documents on the ‘Always’ list:
Application and a Borrower’s Authorization-
These two documents are sent to you by the loan officer and are absolutely essential. Your application, or information sheets, gives us the basic details we need to set up your file. Please take the time to fill out all the questions/requested information. The borrower’s authorization is a protection for you and our company. By signing it, you are giving us permission to start your file. We keep your authorization in the file at all times to prove that you did start this process and when you started it.
Proof of Social Security Number and Date of Birth-
Usually, this is satisfied with copies of your Social Security Card and photo ID. To avoid fraud and to stay in compliance with the patriot act, we need to be sure that you are who you say you are.
*Important side note* All the information on the cards has to be legible, color copies or clear photos are the way to go on this. Faxes come in totally blacked out 9 times out of 10.
Current Mortgage Statement-
This gives us the current breakdown of your Principle and Interest payment, as well as information on your escrow account. It also verifies the loan number and the servicer information we need to order the payoff.
Home Owner’s Insurance-
We do not need the entire insurance binder, just the declaration page. This page has your annual premium amount as well as some basic coverage information. If you have a flood insurance policy we need the declaration page for that as well. Once your loan is in processing we will call and have them update the mortgagee clause to reflect your new lender, that way your insurance provider knows who to expect payments from.
This is usually a 3-4 page document that can be found with the closing documents from your home purchase or most recent refinance. The note is used to verify the original loan amount, original interest rate, VA case assignment number, and how the borrower names are listed on the loan.
Now for the documents on the ‘Sometimes’ List:
State Specific Documents-
Like the title suggests, this varies by state. Most states do not require additional documents, but some do. For instance, Texas loans are required to have a survey of the property in the file. Illinois files require income documents; W2s and 30 days paystubs. Your loan officer’s team will let you know if your state has specific documents that are required and what they are.
If you are a member of a Home Owner’s Association we will need a copy of your statement specifying your annual dues. We are not going to include HOA dues in your loan amount, but we have to have the information on file anyway.
If you are not currently employed some lenders will ask for awards letters or proof of retirement income. Because your loan is a streamline the lender will not be verifying income amounts or checking bank statements, but they do need to verify that there is some kind of income. This is used as evidence that the mortgage payments can be made. Your letter should have come to you at the beginning of the year.
If the address listed on your driver’s license does not match your current address we will request a utility bill. Any electricity, cable, gas, or water bill will work, as long as it is addressed to you and shows that the servicing and mailing addresses are the same. We have to make sure that your property is either Owner occupied or Non-owner occupied. It really doesn’t change the process, but it is important to have the correct information in the file.
Non-Participating Spouse Full Legal Name-
If you are married but your spouse is not on the loan documents, it is very likely that he or she will need to sign a few pages at the closing. This is a requirement in most states. If you send us your spouse’s name at the beginning of the process we can make sure the lender and the title company have all their documents prepared correctly from the start. This does not change who is on the loan.
Those are the basics! Once you are further into the process, you may be asked for additional information, but we won’t go into that here.
Remember, your loan officer wants to help you and make the refinance process as quick and easy as possible. It does require a bit of legwork on your part to get everything together, but once the initial documents listed here are in, you’re off to a great start and a great refinance experience. If you would like to learn more about VA streamline refinance guidelines give us a call now at 866-569-8272.
Refinancing takes many forms, because there are many different situations in which a borrower would want to refinance. It’s not uncommon for a borrower to currently have a conventional loan and decide after a few years that it would be smart to use their VA loan benefits, so they refinance into a VA loan. Another situation might be that a borrower uses their VA benefits to open a new mortgage and would like to refinance using their VA benefits again. Both situations are common and not usually problematic to the borrower or the lender.
It makes perfect sense why someone would think that if they had a conventional mortgage the only option for refinancing is to refinance into another conventional mortgage. In fact, this was true for a long time, and only recently has it been changed to allow a conventional loan to be refinanced into a VA loan. As of the Veterans Benefits Improvement Act of 2008, this option has been available to VA-eligible borrowers who either already had a mortgage by the time they became eligible for a VA loan or opted not to use their VA benefits at first. It’s also possible for a VA loan to be refinanced into a conventional loan, but seeing as how this never provides the borrower with any benefit, not much detail is given on that option. From the VA: “Veterans with conventional home loans now have new options for refinancing to a VA- guaranteed home loan…These new options are available as a result of the Veterans’ Benefits Improvement Act of 2008, which the President signed into law on October 10, 2008. Veterans who wish to refinance their subprime or conventional mortgage may now do so for up to 100 percent of the value of the property, which is up from the previous limit of 90 percent.”
As you can imagine, this is exciting news for veterans everywhere because it gives them more flexibility in using their VA benefits, as well as making the benefit even more substantial than it already was. To refinance from a conventional loan to a VA-guaranteed loan, the process is much like a conventional to conventional refinance combined with opening a new VA mortgage. In other words, there’s a lot to it. Someone refinancing to a VA loan will be met with a standard loan application, the normal credit checks and employment and income verifications, as well as all of the hoops of getting a new VA loan, including getting a Certificate of Eligibility (which you’ll need to do first thing), having an official VA appraiser appraise the value of the home, and all of the other wonderfully enjoyable steps to getting a VA loan.
However, don’t let those things stop you or even delay you in refinancing to a VA loan. The benefits available in a VA loan are substantial and can save you thousands of dollars a year in interest savings and lower monthly payments. For a conventional to VA refinance, the streamline refinance option offered by the VA, the Interest Rate Reduction Refinance Loan (IRRRL), is not available. The IRRRL is only available if the refinance is a VA loan to VA loan refinance. The borrower should also be prepared to expect that the refinance to a VA loan is going to use his or her entitlement amount. Each veteran only has a certain amount that they are eligible to have guaranteed by the VA, and the amount you refinance for will, in most cases, cut into that amount.
If you’ve used your VA benefits before, in order to use them again or refinance a conventional mortgage to a VA loan, you’ll need to furnish proof that you’ve completely paid off any amount owed on a VA loan that was previously opened. This proof can easily be combined with the application for restoration of entitlement. There’s a lot of flexibility built into the VA loan system – especially with refinances. This flexibility is intended to offer a variety of options for any kind of situation so that the veteran can choose the best option for them. In order to make sure you make the best decision for your new VA loan or refinance, consult with your loan officer or a VA-approved lender to get accurate and complete information on what your choices are.
The VA offers a streamline refinancing option called the Interest Rate Reduction Refinance Loan, or IRRRL for short. As the name implies, the purpose of the IRRRL is to offer veterans a streamline refinance that can result in a lower interest rate, and generally a lower monthly payment. The IRRRL is a great option for veterans hoping to get more favorable terms on their mortgage for the rest of the loan. Refinancing in general can be done for one of several reasons: it could be that the borrower has saved up a large sum and would like to take a chunk out of the remaining principal all at once, then get new terms based on the remaining loan amount. It could be that the borrower is looking for a way to acquire a relatively large sum of money for a major purchase like a car or to start a business, so they refinance for an amount slightly larger than what they still owe on the home. And last, it could be simply that the borrower is looking for a lower interest rate and lower minimum monthly payment, and they now qualify for a better interest rate.
Streamline refinancing is usually a very attractive option because it usually does not require any further underwriting – the majority of the information is transferred over from the previous mortgage that the refinance is replacing. It would naturally come as a shock, then, when many borrowers applying for an IRRRL are asked to complete a new credit application or have their home re-appraised. Generally speaking, the VA does not require these things to be done over in order to apply for an IRRRL, but like most things in life, there are exceptions to this rule. What those things might be, well, that’s what we’re covering here. It may come as a relief that much of it hinges on the borrower.
For the most part, any IRRRL that would require a new credit application or appraisal would do so because of the refinancing needs of the borrower. Usually, the reason a borrower has for wanting to refinance and the results they’re hoping to see from the refinance can necessitate a new credit report and/or home appraisal. More specifically, the borrower’s wants or needs might end up raising the monthly payment from what it used to be. This is where a potential problem arises; just because the borrower was able to meet the previous monthly payment does not mean they will be able to meet a higher one. These borrowers can still get an IRRRL, there are just more steps involved.
The VA starts to get uneasy when the monthly payment is going to increase by 20% or more. In other words, if a $1000 monthly payment goes up to at least $1200, the VA will have extra steps to go through before the IRRRL can be approved. At that point, it means that the lender needs to go through the necessary paperwork to establish that the borrower has the income and stability to support the new amount. The VA regulations state: “If the monthly payment…increases by 20 percent or more, the lender must determine that the veteran qualifies for the new payment from an underwriting standpoint; such as, determine whether the borrower can support the proposed shelter expense and other recurring monthly obligations in light of income established as stable and reliable…” But wait, folks there’s more.
Not only do those underwriting steps need to be repeated, but the lender must also provide a certification that the the borrower is financially prepared to take on the higher monthly mortgage payment, and the borrower and lender must both sign a statement that acknowledges that they understand the effect that the IRRRL will have on the monthly payments and interest rate. The statement must take all of the pertinent information from the previous loan and the new loan and compare them side-by-side, so that there is no way to misunderstand what the effects of the new loan will be.
Even in cases where the VA does not require an appraisal or credit check, the lender has flexibility in being able to require an appraisal if it is appropriate in the given situation, but they may be expected to account for and explain why an appraisal is being required.
The VA’s Streamline Refinance program, also known as a “VA to VA” loan or Interest Rate Reduction Refinancing Loan (IRRRL), allows you to lower the interest rate on your mortgage with few or no out-of-pocket costs. This is only available to you if you have already used your eligibility for a VA loan on the property you intend to refinance, and is probably the best option for you if you just want to refinance your existing loan at a lower interest rate.
There are advantages to having an IRRRL. As was mentioned before, you can refinance your existing VA loan to a lower interest rate. This loan can be done with “no out of pocket money” by including all costs in the new loan. The VA does not require an appraisal, income or employment verifications, or a credit report or termite report, as long as the current mortgage has been paid as agreed for the last 12 months and is up to date at the time of refinancing. You are also allowed to include up to $6,000 in your refinancing loan for the purpose of energy efficient home improvements.
Except when refinancing an existing VA guaranteed adjustable rate mortgage (ARM), which is an interest rate that periodically adjusts based on an index from the lender, to a fixed rate, it must result in a lower interest rate, or you will not qualify. When refinancing from an existing VA ARM loan to a fixed rate, the interest rate may increase.
Below are some tips and facts that you should keep in mind when trying to decide whether this type of refinance is right for you:
· Although no appraisal or credit underwriting package is required by VA, your lender may require an appraisal and credit report anyway.
· A certificate of eligibility is not required from the VA. Your lender can use the VA’s e-mail confirmation procedure for interest rate reduction refinance in lieu of a certificate of eligibility.
· Although a Streamline loan may be done with “no money out of pocket” by including all costs in the new loan, you could also make the new loan at an interest rate high enough to enable the lender to pay the costs. But remember, the interest rate on the new loan must be lower the rate on the old loan unless you refinance an ARM to a fixed rate mortgage.
· No lender is required to make you a IRRRL, but any lender of your choice may process your application for an IRRRL.
· While it may 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. In fact, Veterans are strongly urged to contact several lenders. There may be big differences in the terms offered by the various lenders you contact.
· Some lenders may try to contact you and fool you into thinking that they are the only lender with authority to make IRRRLs. Remember, any lender may make you an IRRRL.
· An IRRRL can be done only if you have already used your eligibility for a VA loan on the property you intend to refinance. It must be a VA to VA refinance, and it will reuse the entitlement you originally used. You may have used your entitlement by obtaining a VA loan when you bought your house, or by substituting your eligibility for that of the seller, if you assumed the loan.
· The occupancy requirement for an IRRRL is different from other VA loans. When you originally got your VA loan, you certified that you occupied or intended to occupy the home. For an IRRRL, you need only certify that you previously occupied it.
· The loan may not exceed the sum of the outstanding balance on the existing VA loan, plus allowable fees and closing costs, including funding fee and up to 2 discount points. As previously mentioned, you may also add up to $6,000 of energy efficiency improvements into the loan.
Some lenders offer IRRRLs as an opportunity to reduce the term of your loan from 30 years to 15 years. While this can save you a lot of money in interest over the life of the loan, if the reduction in the interest rate is not at least one percent (two percent is better) and lots of new loan costs are rolled into the new loan, you may see a very large increase in your monthly payment. So research which IRRRL, or Streamline refinance, is better for you!
A popular refinance option has been the Home Affordable Refinance Program (or HARP 2.0). But hold on a second! HARP has its limitations. It’s most notable limitation is that it is a program available only to homeowners whose loan is owned by Fannie Mae or Freddie Mac.
So, your VA mortgage loan is not eligible for a HARP refinance. Did you know that those with a VA loan should strongly consider a VA streamline refinance instead? A VA streamline loan is better than the HARP program in several ways:
It does not require an appraisal.
It does not require private mortgage insurance (PMI). (This fact alone can save you a hundred dollars a month and more on your mortgage payment.)
It does not require income or asset documentation.
It has more lenient qualification standards.
Five Reasons to Refinance
Here are 5 strong reasons why a VA streamline refinance could really benefit you financially:
Refinance to lower your interest rate.I have made the point before, interest rates are near a record low. And as I write this, 30-year mortgage rates are hovering above 3 percent and 15 year loans can be secured for an even lower rate. If your home is now financed at a higher interest rate, it may be a great time for you to consider refinancing. You could literally save tens of thousands of dollars just by taking the time to fill out the necessary paperwork and gather the needed documents. Take advantage of expert help and talk to your VA mortgage loan expert.
Refinance to shorten the term of your loan. If you have a 30-year mortgage, now may be a great time to consider refinancing. With record low interest rates, that 15-year mortgage may not be much more expensive than the 30-year loan payment. An experienced veteran loan expert can tell you in just minutes if this kind of a refinance makes sense. (When I refinanced our home from a 30-year mortgage at about 6 percent to a 15-year mortgage at 3.625 percent, the payment only increased by about $100.)
Refinance to lower your payment. Refinancing to a lower VA interest rate could mean drastically reducing your payment and saving tens of thousands of dollars in interest. Lowering your mortgage payment is a great strategy that can free up hundreds of dollars per month for investing or saving. Although refinancing to lower your payment could increase the term of your loan, it could make sense in your particular situation.
Refinance to cash out home equity. A VA cash out loan could be a great financial move in some circumstances. For instance, it may make sense to cash out some of your home equity in order to buy an investment property or start a business. It mostly depends on what you are trying to achieve and if you are someone who can manage your debts responsibly.
Refinance from an ARM to a fixed rate loan. If you currently have an adjustable-rate mortgage, now may be the perfect time to refinance into a fixed-rate loan. Interest rates are low now, and projected to remain low, but they won’t remain this low forever. Locking into a low fixed rate can protect you from rising interest rates in coming years. Additionally, a fixed payment is easier to plan and budget for.
Can Refinancing Help You with Your Financial Goals?
Make a quick review of your financial goals What are you planning for your financial future?
Do you want to lower your monthly mortgage payment?
Do you want extra cash flow for savings or investment?
Do you want to pay off your mortgage and get out of debt faster?
This is a rare moment in the history of home mortgage rates; your’s is a rare opportunity with VA interest rates a remarkable value. With some thorough research and planning, refinancing your mortgage could turn out to be the best thing for your family and for your pocketbook.
VA loans are a special loan program designed specifically for veterans, issued by approved lenders, and guaranteed by the federal government. The VA Streamline Refinance is the most common loan type within the VA loan umbrella, and is officially known as an Interest Rate Reduction Refinance Loan (IRRRL).
VA loan closing costs can be rolled into the cost of the loan, allowing veterans to refinance with no out-of-pocket expenses. Sometimes it is also possible for the lender to take the brunt of the cost in exchange for a higher interest rate on your loan.
The Time is Right!
VA streamline loans no longer need a home appraisal or 620 FICO scores! Perhaps you have tried and failed to get a VA streamline in the past. Don’t let that derail your efforts today—this is a different financial landscape than even a year ago. Apply again now.
To qualify for a VA Streamline loan, you must meet the following requirements:
Be current on your mortgage with no more than one 30-day late payment within the past year.
Your new monthly payment for the IRRRL must also be lower than the previous loan’s monthly payment. (This condition does not apply is if you refinance an ARM to a fixed rate mortgage.)
You must not receive any cash from the IRRRL.
You must certify that you previously occupied the property.
You must have previously used your VA Loan eligibility on the property you intend to refinance. (You may see this referred to as a VA to VA refinance.)
Interest rates are still in a range that should be considered “the chance of a lifetime.” That is not just exaggerated talk. Historically, VA interest rates are in a range that should motivate every veteran to look more closely into a VA mortgage loan or a refinance.
Fixed interest rates are still very attractive for long-term loans. But before you limit your thinking, you should also consider the amount of time you plan on being in your home. If you’re only going to be in your home for a few more years, it may make sense not to refinance out of your ARM. If you’re going to be in your home less than seven years, it might be a smart move to refinance to an ARM loan.
A drop of just one half to three quarters of a percentage point in interest can lower your monthly payment. If you don’t refinance, you may be paying too much every month for your loan, and that’s never a good financial move. There are a couple of different ways you can lower your monthly mortgage payment.
You can simply refinance to a lower interest rate. A lower rate generally means a lower monthly payment.
You can change the term of your mortgage. For instance, if you have a 15-year mortgage, you can lengthen the term to 30 years. Since the balance of your mortgage is spread out over a longer period of time, your payment is lower. However, if you have a 30-year mortgage and one of your financial goals is long-term savings, you may want to consider shortening your term to 20 or even 15 years. Your payment will be higher, but you will pay much less in interest over the life of the loan, saving you thousands of dollars in the long run.
Remember, the VA streamline refinance loan (IRRL) lowers your interest rate by refinancing your existing VA home loan. By obtaining a lower interest rate, your monthly mortgage payment should decrease. Now that’s some good financial news. Act on it!
The VA streamline is currently the best loan option for veterans in the market to refinance their home loan. Many veterans are currently in high-interest rates and should be refinancing their current VA loans to a fixed 3.75% rate for 30 years. With interest rates currently so low, now is the time to get locked into a low-interest rate and potentially save hundreds of dollars every month.
Many lenders, including GMAC, offer VA streamlines for veterans. VA streamline means that a veteran homeowner currently has a VA loan and is looking to refinance to a lower interest rate. Since many lenders offer the VA streamline, it’s important for veterans to research and understand credible lenders and brokers to assist them.
A common misconception among veteran homeowners is that using a home loan broker will result in more closing costs and higher interest rates. This is false.
On the contrary, many brokers actually offer lower interest rates than lenders and no additional closing costs. Lenders like GMAC are willing and able to offer these brokers large discounts because of the volume of loans they are closing.
To bring the point home, let’s compare the lender and broker relationship to the home improvement store Home Depot.
Home Depot buys millions of dollars of hardware, appliances, paint, and other home improvement items from hundreds of companies across the nation. Because Home Depot buys these items in bulk, the wholesale companies selling to Home Depot offer them a cheaper price range than someone only buying one item.
These wholesale companies give Home Depot a bulk discount since they buy so many items and understand the discount is well worth the company’s time to receive the business of Home Depot. If someone directly contacted the wholesaler to get one item from them, would they be paying less than at Home Depot? Not necessarily. Since the customer would only be buying one item, they would have to pay a higher rate and not qualify for the bulk discount that Home Depot receives.
The lender-to-broker situation is very similar. Since many brokers close thousands of loans, they are offered bulk discounted rates because the discount is well worth it for the lender. The broker is providing the lender with a large amount of business and profit. Consequently, going directly with the lender does not necessarily mean a veteran homeowner will be getting the lowest interest rate on the market.
There are many brokers across the nation that are approved by GMAC. Many of these brokers have access to the “wholesale” or “tier 1” rates. These rates are typically better than going directly to the lender. If a veteran goes directly to GMAC to refinance, they are not guaranteed to get the “wholesale” rate, but will typically receive the “retail” rate which will be a higher interest rate. Just like our example with Home Depot, GMAC is forced to give higher rates to single customers but can offer discounts through large brokers closing a lot of loans.
How can veterans ensure they are getting the best deal and service?
Below are three things to take into consideration before going with a lender or broker. These three things can make all the difference for veterans looking for a hassle free refinance.
1) Go with a lender or broker that has experience with VA Loans
This sounds like a pretty simple statement, but many lenders are unfamiliar with VA loans and steer veterans into worse loans. VA Loans are hands down the best loan on the market right now. If any lender of broker says otherwise, they do not have experience working with VA loans.
2) Research the difference between a fixed and hybrid loan
Typically when an adjustable loan is mentioned everyone cringes. However, VA Hybrid loans have VERY different rules than the conventional adjustable loans that flooded the market 5-10 years ago. Many people don’t understand that the VA Hybrid loan is actually fixed for 5 years. For veterans who are very sure they will be in their current home for less than 10 years, the VA hybrid loan can be the best option. Rates for VA Hybrid loans are as low a 2.75% and cannot raise more than one point per year after the first five fixed years.
3) Sometimes the lowest interest rate is NOT the best option
Make sure to understand your break-even point when streamlining your VA loan. Many times homeowners assume the lowest interest rate is always the best option for them. If a homeowner is only going to be in a home for the short amount of time, higher interest rates may be a better option. Why? If the break-even point for a loan is 6 years with a 3.75% or 4 years with a 4.25% and the homeowner is only going to be in the home for 5 years then the 4.25% interest rate is going to be a smarter loan for that situation. The closing costs for a VA streamline are typically rolled into the loan and the monthly savings help offset the costs of the refinance.
If you have any other questions or concerns about streamlining your current VA home loan, contact a loan officer at LowVARates.com for assistance. They can help you understand the best loan for your situation.
As always veterans, make sure to check VA Streamline rates through GMAC, LowVARates.com and other brokers and lenders to see which can offer you the best streamline refinance for your situation.
With interest rates at an all-time low, veteran homeowners should be looking to lower their home interest rate. The current rates for a fixed 30 year VA home loan are around 3.75%. The general rule is if the current interest rate you have is one point above the refinance rate it usually worth refinancing.
Many lenders, including Bank of America, offer veterans the opportunity to “streamline” their existing VA home loan. A VA streamline basically means a veteran currently has a VA home loan and wants to refinance that VA loan to a lower interest rate. If a veteran does not have a VA home loan and is looking to refinance into a VA loan that is referred to as a VA “cash out”. The VA streamline loan is a VERY simple process and does not require an appraisal. The VA cash out is a little more complicated and requires an appraisal. Veterans that currently have a VA home loan and a high-interest rate definitely should look into “streamlining” their rate and save thousands of dollars over the life of the loan.
Bank of America Brokers
Bank of America is a national lender that allows thousands of brokers to close deals for them. When a broker closes a deal they pay the lender a commission on the loan and many times offer lower rates giving an incentive for brokers to close more loans. A broker that closes thousands of loans for Bank of America can qualify for the “wholesale” rates. Many times these interest rates are better than the actual rates offered by the bank.
Why does Bank of America do this? The answer is pretty simple. They understand that giving lower rates to brokers gives the broker companies an incentive to close more loans and consequently padding Bank of America’s pockets. This kind of business ends up being a win-win situation for the broker, military homeowner, and the bank. The homeowners get lower interest rates, the broker is able to offer discounted pricing while making a commission and the bank is able to make money on the refinance.
Where should I get my VA Streamline?
Many lenders nationwide have the ability to streamline your VA loan. However, many lenders and brokers rarely deal with VA home loans and can lack the expertise needed to close these loans. There are brokers (Ex. LowVARates.com) that specialize in VA home loans. VA home loans have different requirements and regulations then a conventional or FHA loan. If the lender or broker does not have experience closing these loans veterans can get stuck in a messy situation. It’s important to go with a company that has dealt with veterans before and understands the ins and outs of VA home loans.
VA Approved Lenders
Thousands of brokers and lenders across the nation are approved VA lenders. The VA DOES NOT close loans, but approves or allows brokers and lenders to process these loans. Just because a lender or broker is “approved” does NOT mean the lender has experience closing VA home loans. Veterans, make sure to do your homework on the lender and find out if they have experience working with VA home loans.
Here are some of the questions you can ask the lender and loan officer:
1) Have you ever worked with someone with a VA home loan?
a. If yes, ask how many they have worked with. If no, move on to another lender.
2) What is the difference between a VA home loan and conventional loan?
a. If they say there is no difference they typically have never dealt with a VA loan
3) I have a VA home loan, would you suggest me staying with a VA loan?
a. If the lender looks to steer you away from your VA loan DO NOT listen. VA Loans are better loans, but some lenders do not work with them or are unwilling to put in extra work and will try to steer you to another loan.
It’s important for veterans to feel comfortable and have confidence in the lender they choose. There are thousands of lenders, but many lenders and brokers are not comfortable dealing with a VA streamline.
As always veterans, make sure to check VA Streamline rates through Bank of America, LowVARates.com and other brokers and lenders to see which can offer you the best streamline refinance for your situation.
The VA Streamline refinance home loan is without a doubt the best mortgage refinance loan on the market. No other refinance loan program is as simple and easy to qualify for and there are so many unique benefits that come along with it. The only qualifier, in order to do a VA Streamline refinance, is that your current loan must be a VA home loan.
One of the biggest benefits of the VA Streamline refinance is that you do not have to go through credit qualification. There is absolutely no need for lenders to pull your credit history and look at your scores. However, your existing mortgage must be current and you cannot have had any more than one thirty- day late mortgage payment within the last 12 months. In order to do a VA Streamline refinance, your current loan must be a VA home loan.
Another benefit is that the regular underwriting process does not apply. Your lender is not going to check to see how much money you make. So you do not need to send in bank statements, W2’s, paychecks, etc. Since you have been making your mortgage payments, they know that you have the means to keep it up. Along with this, leaders are not going to be calling your employer to make sure that you are still working with them before considering giving you a loan. With a VA Streamline refinance an income verification is no issue to you at all, since they will not be checking up on you that way. This means one less stress for you! It’s is just one more little way we try to make this experience as easy for you as possible!
VA Streamline refinances in most cases can allow you to arrange your refinance to be completed with absolutely no out of pocket expenses. All of the closing costs and pre-paid can be rolled into the new loan amount and on top of that there is no appraisal required. As you can see there are so many unique benefits of a VA Streamline refinance as listed above, if it sounds like this is for you, take advantage of this amazing opportunity.
My name is Ryan Johnson and I will be the VA loan specialist going over this program with you. Now I am a licensed mortgage professional in 37 different states across the country. I have been with Low VA Rates for 4 years and in the time frame I have helped hundreds of families buy homes and refinance their homes and take advantage of these lower interest rates like you are looking to learn about now.
The purpose of this quick overview call is to give you a general idea of what the VA streamline refinance program is, what the different interest rates, programs, terms, that you can take advantage of and a basic understand of what it takes to get started. This overview call is not meant to replace a one on one conversation. In fact, immediately following this overview you will be transferred back to my staff so we can have a one on one conversation to go over your specific numbers on your loan. But at least this will give you a good overview of what this program is about and what it can do for you so that when we do have that one on one conversation you already have an idea of what you can take advantage of and be better informed.
We’ll start off with what this VA Interest Rate Reduction Program is. Back in 1980 the VA came up with this program as a way to put you into a better, lower interest rate loan than you bought your house on. They do that by letting you pay off that higher rate loan and replacing it with a new lower rate loan. Thereby saving you money in interest. Check out this video to learn more about using a VA hybrid loan for refinance:
Now there is nothing really special about that process, civilians have been doing that sort of thing since mortgages have been around. They just call it a refinance. But what makes this program special is how you qualify for it. See if you were a civilian and you tried to refinance your house you have to go through that same long, drawn out expensive, frustrating process that you originally went through when you bought your house originally.
I’m sure you remember that process vividly because in most cases it tends to one of the least enjoyable experience when it comes to buying something. Well believe it or not everyone has to go through that over again just to lower their rate if that is something they want to do. Everyone has to accept you. One of your very special veteran benefit entitlements is this program, the VA Streamline refi where your able to reduce your interest rate with no full appraisal, no full credit report, no income asset or employment verification and no inspection. Quite simply you sign the VA’s application, supply some of your existing mortgage documents and you get a new lower interest rate. That new lower rate will help you to pay off your house faster or lower your monthly payments or both. You also get to miss a couple mortgage payments when you take advantage of this program. You are also able to get a cash refund from your existing lender that you are entitled to. So we will go over all of those benefits in a minute. Now the VA offers four basic options when it comes to buying or refinancing a home. And so each of these options has a different goal in mind and also I’ll go over the details of those and what we are going to do is compare each of these options to an example veteran.
We’ll just say for our example veteran who has a 6% interest rate on his loan of $200,000. And we’ll see what would happen if that veteran was to go with each of these different options. Just to kinda give you an idea of what each option can save you. And I’m gonna go over the interest rates of each option for you as well. Now of course your numbers are going to be different when we go over those but at least gives you a general idea of what each of these programs is about. So we’ll go ahead and look at option 1. Option 1 is by far the most popular program on this VA streamline refinance. The reason why is the number one most popular goal I hear with the veterans that call in, and we get hundreds of calls a day is I want to lower my monthly payment as much as possible. Well, option achieves that better than any other option. That is the reason it is the most popular. You can get an interest rate as low as 3.75% on a 30-year loan with option 1. Well, if our example veteran was to go with this program it would drop their rate from 6% down to 3.75% That is a 4500 drop in annual interest or 375 dollars per month. That is what makes that program so appealing. Now option 1 is called the VA 3 Year Hybrid Program and here is how it works. The 3.75% would be fixed in and guaranteed for three years. At the end of that time, the VA then allows the rate to change but only by a small amount. The VA only allows the rate to go up or down a maximum of 1 percent in any given year thereafter.
Now this is not one of those fully adjustable mortgage programs you have heard about in the news the last couple of years that have caused our country so much trouble. The VA would never stick you into a loan like that for one big reason. Your loan is guaranteed by the department of veteran affairs. Now when you bought your house they may have never explained to you what that guarantee is so I will do so now just in case you weren’t aware. What that guarantee means is that the VA guarantees that you will always be able to make your payments, you’ll be able to make them on time and if you should ever have any difficulty making your payments the VA will step in and actually help you or even pay your mortgage payments for you until you get back on your feet and even if that measure should fail and the lender is forced to foreclose on your house the VA is the one that is responsible for paying off the mortgage loan. Now the reason that is important to know is that is the only reason the lender was willing to give you this house with no down payment because that very attractive guarantee. And the VA only puts that guarantee on safe, stable, reliable, loans that have a proven track record of the veterans being able to pay their payments on time throughout the entire term of the loan. And that is no exception for option 1. You can have confidence knowing the VA is putting you into a safe stable reliable loan because they certainly don’t want to pay off your mortgage loan and they definitively don’t for the tens of thousands of veterans that take advantage of this program every single month.
Now the reason they came up with this option 1 is because they are taking advantage of a confirmed US statistic. And that is we as American homeowners only keep our mortgages an average of three to five years and then we get rid of them. WE refinance to take advantage of lower interest rates and better loan programs like you are looking to do now. We refinance to take cash out of our properties and pay off debt, do home improvements, or we sell our homes for job changes, job transfers, family changes, or we just want to live in a different area. There are many different reasons why we sell or refinance our homes so statistically whether you plan on it or not you are very likely to do one of the items I mentioned in the next 3 to 5 years.
The VA looked at that and said, Well why in the world are most of our veterans taking these 30-year fixed mortgages and paying a higher rate than they have to? Let’s put a loan program together that is just as safe as a fixed rate loan because it is fixed for that important 3-5 years and we can offer it at a significantly reduced interest rate and here you have the birth of this 3 Year VA Hybrid Program at 3.75% interest rate. Now lets say you get option 1 and you have enjoyed the last three years of 3.75% You’ve saved a bunch of money and year four rolls around and you haven’t made any changes and you are going to be in the loan. No problem. At that point, the VA has stated the rate can change. It can go down it can stay the same it may go up .1% but the max it can go up is 1% to a maximum of 4.75%.
Well that probably a whole lot lower than what you have right now and if you don’t want the rate to change at all at the end of those three years you can take advantage of this same easy streamline refinance program and lock in at another low three years or maybe just go into a full fixed rate at that time if you’d like. The VA wanted to have a way for you to lock into a different loan program anytime during the three years or after should you choose to do so. So that is option 1 the most popular program of all because it does lower your payment the most. Option 2 is very similar. It is also a hybrid program, the Vas 5 Year Hybrid program. And you’re able to get an interest rate as low as 4.5% on that program.
So if our example veteran is at 6% went with option 2 they would save themselves $3000 per year in interest or just about 250 per month on option 2. Option 3 is the VA 15 year fixed loan. This option will help you pay off your house faster compared to your 30-year term loan. What this option is going to do for you if our example veteran went with this loan it would drop their rate from 6% to 4.5% on a 15 year fixed loan that would save them just under $200,000 in payments and interest on top of the nice bonus of paying off their house in half of the time so this is the program that will save you the most over the term of the loan. Now that does come with a bit of a cost. That cost is in most cases you will experience a higher loan payment than your current payment. But it doesn’t have to be that much more.
The typical increase is anywhere from 10-30% of your traditional 30-year payment. So for example if you are paying one thousand per month for your mortgage you would see your payment rise to 1100 to 1300 per month and you would be able to pay your house off in half of the time with this option 3. So if you can afford that payment look no further because this is the best option for you because it will save you more than any of the other options. And that leads us to the fourth and final option which is just your standard, plain Jane 30 year fixed loan. Just like you’ve probably got right now. You are able to get an interest rate based on today’s rates as low as 4.75% on that particular loan program. So if our example veteran went with option 4 it would drop their rate from 6% to 4.75% which is a 2500 annual savings or just about 208 dollars per month they would save in payments and interest in option 4. Now those are the four different options with their interest rates and example of the savings they can offer you.
On top of that, regardless of which option you choose you will get the following additional benefits Number one the VA allows you to miss your next two months of mortgage payments and that could mean two, three, four thousand dollars in your pocket by missing those next two mortgage payments. The second benefit the VA offers you is about two weeks after this transaction closes you are going to get a check in the mail for whatever is in your current escrow account and you get to keep that money and do whatever you want with it.
The reason you are getting that check is because part of setting up this new loan for you is the VA requires us to fund and establish you a new escrow account to ensure that your taxes and insurance are covered when come due but you already have an escrow account with your current lender so by law when we pay them off they are required to refund this money to you and you can keep that money and do whatever you want with it because like I said your taxes and insurance will be taken care of in your new loan. And so if you add the escrow refund to the two skipped payments you could walk away from this transaction with 2-3-4 5 I’ve seen as much as 9000 dollars in a veterans pocket in addition to saving 500 dollars a month every month on his monthly payment. So you can get some important financial benefits from this program and that is why the VA makes it so easy to qualify for and tries to motivate you to take advantage of these programs.
At this point I usually get a lot of questions: “Ryan what’s that catch? Is the program legitimate? It sounds too good to be true!” I can assure you this program is legitimate in fact once this overview call is done and we have our one on one conversation I will even give you the vas website so you can look this program up yourself on the VA’s website and you will notice that website will be very similar to what you have learned today on this overview call. There is no catch. The VA is trying to help you by giving you a lower interest rate, but you do need to be aware of some changes when you do a VA streamline refinance. There’s nothing really major it is still a VA loan, you still retain all of the same VA loan benefits, your taxes, and insurance are still included in your monthly payment. Literally everything is identical to your existing mortgage except for these four changes Number one, you will be paying your payment to a new VA lender because your old VA lender is paid off. Number two, you will have a lower interest rate. Number three you will have a lower payment as long as you choose 1 2 or 4. Now regardless of which you choose another bonus of your new lower payment is the fact that more of your mortgage payment is going to be applied to the principle balance every month. For example when you pay your mortgage payment right now let’s say 200 per month goes toward your principal balance every month.
Well, after this transaction is done more like 250 to 300 per month is going to be paid down on your principle every month so you will actually see your mortgage balance drop more rapidly with this program. Just another benefit there. The fourth and final change you will experience is that you may be financing a little bit of a higher loan balance than you existing loan balance.
There are three reasons your loan balance can change.
Number one, the two months missed mortgage payment. That is an optional benefit the VA offers you. If you take that money to use for your own purposes it’s not free money, its deferred interest that will be added to the loan.
The second reason your loan amount can go up it the escrow refund check. Remember you get to keep that money and do whatever you want with it but it’s not free money either because we have to establish you a new escrow account to ensure your taxes and insurance are covered and that is just added to the loan as well. And so at this point I get a lot of questions like, Ryan I am adding 2 3 4 5 dollars whatever it ends up adding up to in your case to your loan that you don’t have to.
Are you sure that’s a good idea? Well, believe it or not, the answer to that question is yes! In most cases, it is a very good idea and here is why: You are going to be financing this new loan at such a low-interest rate, as low as 3.75%, you would be better off taking that money from the two missed payments and the escrow refund and putting it to good use and paying off high interest rate credit card bill, a car loan, a personal loan something that is financed at a much higher interest rate than 3.75% and now you can save even more money per month on payments and interest on top of the savings from the mortgage. And once again those are only suggestions and these cash benefits are optional and you don’t have to add to your loan, but they are there if you like. And a third and final reason your loan can go up is because of closing costs.
Whenever you purchase or refinance real estate, regardless of the loan or lender you choose there are closing costs involved. However, there are four very nice things about closing costs when it comes to the VA Streamline refinance. Number one you do not need to pay a single penny of these costs out of pocket. These costs are simply rolled up into the mortgage and are included in the monthly payment a savings we have already gone over. The second nice thing about these costs is that in most cases, now I am not an accountant so I can’t speak for you directly, but in most cases these costs are 100% tax deductible. Meaning you will be able to write these off when you file your taxes. You should expect to get a bigger return from the IRS. So, once again consult your tax professional on that. The third nice thing about these costs is believed it or not these costs are optional.
You don’t need to add any costs to your loan if you don’t want to and here is how that works. Let’s say you take option 1 and you qualify for a 3.75%. Because you may be concerned about adding costs to your loan because you may be moving in 6 months you can choose to close your loan at like a 4% or a 4.25% probably much lower that what you pay now but when you take a little bit of a higher rate the VA allows you to reduce or even waive the closing costs involved so nothing gets added to your loan. And so we can go over that in detail if those costs are a concern of yours after this overview call. And the fourth and final thing that is nice about those costs is the fact that the VA is looking out for you.
The VA built this program to put you into a better loan than you are in now and that includes ensuring that you are saving more in interest than this transaction is costing you. And so they have a very simple test they run that you must save more in interest than the transaction costs you or they won’t let you do it. It’s their way of protecting you to ensure you are putting yourself into a better financial situation than if you stuck to your existing loan so we will go ahead and run that test after this overview call to ensure you are making a good decision by going into this program or whether you should just stick to your existing loan. Now as far as what closing costs can look like, they should be very similar to what was involved when you bought the house. You probably don’t quite remember what those were, most people don’t but on a national average they tend to be between 2-3 percent of the outstanding loan balance. Now of course you can reduce or waive those costs by going with a little bit of a higher rate but that typically what they tend to be.
Ok, so you have just heard the details of what this program involves and what these changes involve. Now let’s say one of these options is peaking your interest and you like the idea of missing some payments and lowering your monthly payment, what happens next?
My father has always told me that I need to keep it simple. I tend to ramble when writing, so I’m going to take the high road and make this short and sweet for everybody reading.
If you haven’t refinanced yet, and the proposed loans will positively save you money within the first five years… Just do it.
If you’re “thinking” about it but haven’t even figured out whether it’s worth your while? Just do it. Either it is, or it isn’t.
Truth be told, I’m keeping this message simple because I don’t have the time to go on and on like I’ve done in prior posts, about the countless reasons why you should refinance. I’ve been putting in 60-hour weeks just trying to ensure that my borrowers get their loan closed in November. Everyone I speak with already knows about the two deferred payments; everyone knows about escrow refunds, energy-efficient mortgages, and no out-of-pocket costs. The VA Streamline is about as simple as it gets when it comes to home loans.
Simple requirements = tons of qualified applicants, right? These days, e-mailing applications and exchanging information via fax has made it easy for me to get these loans into underwriting in as little as 2-3 days in some cases.
However, for as simple as the VA loan is, and as great as these rates are, by sharp contrast these lenders are equal, if not more, difficult than ever.
They sure were an easy-going group until recently. They were like that rich, drunk friend who acted recklessly but seem to have cleaned up their act to some extent. But even after taking all that bailout money, that hasn’t kept them from being the profit hungry machines they are.
Profit-hungry lenders, unfortunately, are exactly who we have to deal with when we’re striving to deliver the best rates. Hence, selectivity has entered the equation. The more selective a lender is in choosing borrowers, the more profitable his loan portfolio will be. It’s nothing short of price discrimination, much like health insurance companies. Minimum credit scores, valuation requirements (appraisals), tiered credit pricing, and exclusions for investment properties, manufactured properties, etc. have all become the standard qualifying procedures for many lenders. The domino effect only worsens our odds of qualifying you with time.
Luckily, with the spectrum of lenders we work with, we can still find a home for just about anybody’s loan. But it’s getting tougher and tougher every day.
It seems that just about every month, I have interested borrowers who find out that the lender we were hoping to use has just disqualified them based upon new criteria.
And every month, I am able to qualify fewer of my valued clients, with fewer of these competitive lenders. The VA Streamline loan used to be an easy solution. It’s becoming a meritocracy.
So much of my time, it seems, is spent trying to communicate the urgency to my borrowers that there is no time like the present to get this refinance done.
In fact, right now I’ve got some borrowers whose loans need to close ASAP. If they close even one week behind schedule, they will be disqualified under this lender’s new standards.
So like I said… I’m short on time, I’m keeping the message simple. Don’t wait. Your opportunity will not last forever. It doesn’t cost a thing to process your application and lock in a rate.
You’ve got nothing to lose. 30 minutes of your time is a small price to pay for all that the VA Streamline loan brings.
See, I’ve already spent too much time telling you this.
Is it even possible to refinance a VA loan with a second mortgage attached to the property? Well, to understand if this is possible I need to discuss what is involved when there are multiple mortgages on one property. A second mortgage is given to a Veteran homeowner when they have equity in their home and they want to borrow against it; so they go to a lending institution and take out another loan against the home. Now there are 2 mortgages listed on the title. This can be problematic when trying to do a streamline refinance. Mortgages are recorded on a title based on dates. When a Veteran uses his/her VA loan to buy a home, then there is a Mortgage recorded on the title as a first mortgage (recorded first). Then they take out another mortgage on the same home (recorded second). This is pretty simple to understand.
When VA mortgage rates drop and a Veteran wants to do a streamline (non-credit qualifying loan) refinance and they have a second the mortgage company must now complete a subordination request. This is simply preparing documents or a loan package for the second mortgage company outlining the details of the streamline refinance transaction. You see since the second mortgage company has an interest in the property (they loaned money on it) they must agree to stay in second lien position, or subordinate to the new first mortgage. Most of the time a second mortgage company will agree to do this, but there are instances when they will not. There are 2 main reasons for this – 1. The borrower is late on the payments with the second mortgage company. 2. The cost or investment to refinance the first is too high and might affect the loan to value based on the original appraisal. If the second mortgage company refuses to subordinate then the refinance of the first will not take place.
As a Loan Officer, this can be very frustrating at times because I can see much value when doing these streamline loans for Veterans. There isn’t much recourse we can take when a second mortgage company denies a subordination. I would say about 75% of the time we can obtain an agreement from the second mortgage company. My suggestion to all Veterans who have second mortgages is to attempt to refinance because the odds are in your favor that your second mortgage company will agree to remain in their current lien position and this works for California VA Loan, Florida VA Loan, and really all VA Loan types.
I have done mortgage loans for nearly 7 years now. Every different type, kind and term. I feel most gratified though when I have the opportunity to work with and complete VA loans for veterans.
There is something special about those who have served our country. They have put their life on the line for me and I feel a sense of gratitude for that. For example, last year in 2008 I helped refinance a commander in the Army. He has been in the army for 22 years. Rates dropped so far this year 2009 that we refinanced his VA loan again with a VA streamline. Since doing his loan this time we have stayed in touch and have done some catching up. It was great to talk again about his goals, and I recently sent him an email with some pictures of our new baby. He responded right back to the email with an update on his family too.
Helping veterans take advantage of the VA’s loan programs is a small benefit offered to those who have served in our armed forces. I get excited about helping veterans finally use this program, something not available to regular civilians. I feel proud to have helped with part of their fulfillment of dreams to own a home when I can help with their loan. Home ownership has for decades been the hallmark of the American Dream.
I also really enjoy getting to know each veteran borrower and where they have came from, how their service in the military has changed their life, where they have traveled and served and what goals they are currently pursuing to get them the best loan to meet their needs. Finally, I feel connected personally to my veteran borrowers because of the freedom they and those that have gone before them have offered me. When I go camping with my family, set off fireworks on the 4th of July or even go down to the grocery store and just buy food to make dinner I often contemplate the freedom I have to come and go and do the things I please here in America. Those freedoms have been purchased on the backs of our nations military. And so I feel a great connection and a great respect for those I am able to serve in a small way by providing home loan services that meet their needs and expectations.
If you read my last post regarding VA refinancing, you are already aware that there are essentially two main types of refinance loans for veterans. I am wanting to focus on the VA streamline or Interest Rate Reduction Loan (IRRL) for this post.
Why would a veteran want to do a streamline refinance?
The most simple and straight forward answer is because the interest rates being offered now are lower than when the veteran purchased the home or refinanced last. If a veteran had purchased a home in 2004, it is likely the interest rate at that time would have been somewhere between 6.25% to 7.0%. Interest rates offered to veterans at this time are closer to 4.5% to 5%. When I was a loan officer I would be amazed at how many people had no idea how much a small drop in their interest rate could save them. I recall one conversation where I was told, “unless I can drop at least 3% points, then it is not worth refinancing.” Attention please veterans reading this blog; DO NOT make that same mistake. The general rule of thumb is that a 1% decrease in your interest rate will normally be worth your while.
How do you get started with a VA streamline refinance?
The most important thing to do prior to contacting a VA approved mortgage lender or bank, is to prepare yourself for the conversation that will take place once you contact your VA mortgage company or lender of choice. Here is a checklist of information or documentation you should gather, prior to contacting a lender:
Gather this information – Step 1
1. Your current monthly mortgage statement. This could be a statement that you get monthly in the mail or you can print current loan details off the lenders web page.
2. Your Mortgage Note. The mortgage NOTE, will normally be found in the binder or folder of information you received when you closed on your home or last refinance. In large bold letters at the top of this document it will say NOTE: NOTICE THIS LOAN IS NOT ASSUMABLE…..
3. Your home owners insurance information. This could be the Declarations Page or just your agent’s contact info, but you will need to have this information available.
4. Survey of property. If you live in TX, FL or OH you may be required to have a survey.
Contact an approved VA lender or bank – Step 2
It is important to understand that the Department of Veteran’s Affairs (VA) does not lend money. The VA approves or authorizes mortgage companies, that have fulfilled certain criteria, to make loans to veterans. Each approved or authorized VA lender will be given a VA LENDER ID # from the VA. Make sure to ask whoever you decide to use for their VA ID number. The internet is a great way to find approved VA lenders and as you may be aware from reading this blog, we are confident in Low VA Rates and their ability to get you approved for a VA streamline loan.
I look forward to sharing more insights into the VA streamline loan on my next post. Veterans, thanks for your dedicated service!
With interest rates at all time lows, many home owners today are found wondering if a refinance is something that would benefit them and/or if they are even eligible to refinance in today’s crazy housing and credit markets. Here at LowVARates.com we make it our goal to shed light into some of the most pressing concerns and topics of high importance among our nation’s military and VA home owners.
Why should a veteran refinance?
There are numerous reasons for which someone might want to refinance but here is a list of the most common
Lower your interest rate
Lower your monthly payment
Shorten your term or pay off home faster
Pay off consumer debt
Do home improvements
Veteran home owners need to understand that when trying to refinance a VA home loan, there are two primary questions that must be answered in order to first determine what kind of refinance makes the most sense. 1. Do you currently have a VA mortgage on your home? 2. Do you want to do home improvements, pay off debt, or take cash out of your equity? If you answered “yes” to #1 and #2 then you will be taking part in a VA cash-out loan. If you answered “no” to #1, and “no” to #2 you still will be doing a VA cash-out loan, even if you are not really taking out cash etc. If you answered “yes” to #1 and “no” to #2 then you are going to participate in the VA streamline refinance or the IRRRL.
What is a VA streamline or IRRRL?
This loan is the most popular loan among current VA home owners. The Interest Rate Reduction Refinance Loan (IRRRL) is a special government-endorsed refinance that eliminates all the red tape and difficulties that can normally arise with a normal refinance or a cash-out. In a nutshell, the theory from the VA and the mortgage lender is this; if you currently have a VA loan, then the Department of Veterans Affairs does not require you to re-qualify to simply lower your payment, rate or term. Now on the other hand, if you had been approved for a loan a few years back when you bought your home, and now you want to build an addition onto your home, then the VA would require you to get approved again, even if the interest rate is lower, because you are taking on additional debt, and the VA and the mortgage lender need to make sure you can afford that new responsibility. The VA streamline or IRRRL will normally carry out the following benefits to the VA home owner. Benefits of a VA streamline refinance are:
Immediate payment reduction from the lower interest rate
Ability to pay off your home years faster with no extra money
You may be able to postpone or defer your next two mortgage payments
Most veterans will get a cash refund of their current escrow account
Future posts will get into more of the details on this unique program for veterans.