If you currently have a VA loan and wish to lower the interest rate, the VA Streamline can get you that lower payment with little to no verification required. Veterans that were eligible for a VA loan in the first place typically qualify for the refinance, giving them the opportunity to lower their interest rate and save money every month.
Applying for the VA Streamline
Applying for the VA Streamline loan is very simple as there are very few requirements for the program. The entire process typically takes less than one month to complete. All that you need to apply is as follows:
- Timely mortgage payments over the last 12 months with no more than one late payment (30-days late) during that time
- The new payment must be lower than the original VA loan’s payment; the exception to the rule is if you refinance from an adjustable rate to a fixed rate loan
- You must be able prove owner occupancy prior to the application for the VA Streamline Loan
You will not be required to provide any income or asset documentation. In addition, the lender is not required to pull your credit as the VA does not care about your credit score for this program. Some lenders do decide to pull credit anyway since they are the ones funding the loan – the VA simply guarantees the loan.
Closing Costs can be Included in the VA Streamline Loan
The VA Streamline Loan is strictly to help make your payments more affordable; you cannot take cash out of the home with this program. The idea behind it is to give you more disposable income every month in order to make your daily living expenses less of a stress on you. Because of this, you cannot include another loan or debt to pay off, but you can include the closing costs for the new loan. This means your new loan amount can be equal to the amount of outstanding principal on your current VA loan along with the closing costs charged by the lender.
One closing cost that any borrower will pay on the VA IRRRL program is the funding fee. This fee, which you paid with your original VA loan, is what helps the VA continue to do what they do. The money they collect from each new loan gets placed into an account that helps them guarantee defaulted loans. When you originally took out your VA loan, chances are you paid 2.15% of the loan amount if it was your first time using your entitlement. With the VA Streamline Loan, you will still pay a funding fee, but a lesser amount – this time around it is 0.5% of the loan amount.
Not Every Lender Offers the VA Streamline
It is important to know that not every lender offers the VA Streamline Loan. Some lenders do not want to take the risk of taking on a new loan that does not have any credit or income verification with it. There are some lenders, however, that do allow the loans but require that your credit gets pulled or requires that you verify your income; every lender is different. Since the VA is not the entity funding the loan, they do not have the final say in what the lender requires – the lender decides what types of risk they want to take. That being said, however, there are many VA approved lenders that do provide the streamline loans as they are a low-risk loan for our veterans.
Does not Require New Entitlement
The good news is that when you refinance your existing VA loan with the IRRRL program, you are reusing your existing entitlement; you do not have to make sure you have enough entitlement left to refinance. In fact, you do not even have to verify your entitlement as the lender can do that on his own with the original loan. All that you have to worry yourself with is whether or not the new interest rate is lower and that your housing payments are on time for the last year.
The VA Streamline Loan is very easy to qualify for, but it is recommended that you shop around with a few different lenders to see the different interest rates and costs available. Just like any other loan program there are different lenders that require and provide different things. When you know you are getting the best deal available you can refinance your loan and start saving money every month!