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VA Streamline Refinance

VA Streamline Refinance VA to VA Loans

A VA Streamline refinance, also known as a VA Interest Rate Reduction Refinance Loan (IRRRL), is just one of the many programs that may be available to you because of your government-backed military home loan benefits. Streamline refinance VA-to-VA loans are designed to refinance existing VA-backed mortgages with less paperwork and hassles.

Quick VA Streamline Facts

  • No need to obtain another Certificate of Eligibility (COE)
  • Reuse your entitlement for IRRRL (if you assumed a loan, you must have substituted your own entitlement for that of the seller)
  • VA Funding Fee is just .5%
  • Appraisal may not be necessary
  • Only need to certify that you occupied the property in the past for IRRRL

Get in touch with one of our seasoned loan professionals now for more on how to proceed. Call 1-866-663-0826 today.

How Much Credit And Income Qualifying Is Needed?

Streamlines may or may not require complete credit and income qualifying. Generally, the VA does not require an appraisal, credit qualifying or income underwriting in order to guarantee most IRRRLs; however, lenders may still need appraisals and underwriting to satisfy their own lending requirements.

An IRRRL transaction usually results in a lower interest rate and monthly payment than the borrower has currently, but not always. Streamline refinance VA to VA loans can also be used by borrowers as a way to switch from an Adjustable Rate Mortgage (ARM) to a fixed-rate mortgage. In this case, the interest rate (at the time of refinance) and/or monthly payment may increase. Whether an IRRRL will lower your rate or payment depends, primarily, on the current interest rates offered, compared to those in the existing loan, including potential increases.

It is common for an IRRRL that the new principal and interest payment achieved will be lower than the principal and interest payment on the loan being refinanced since most borrowers use the program for that purpose. However, there are some cases that can be exceptions to the rule, such as:

  • Loan being refinancing is an ARM
  • IRRRL term is shorter than the term of the loan being refinanced
  • Energy Efficiency Mortgage (EEM) is included in the IRRRL

A borrower could see an increase in the monthly payment with any of these three exceptions. Additionally, the likelihood of an increased monthly payment can be greater if the borrower goes from an ARM with a low introductory rate to an IRRRL with a market-competitive fixed rate or chooses to roll in one or more of the following:

  • Closing Costs
  • Discount points
  • VA Funding Fee

A monthly payment increase of 20 percent is not typical with Streamlines, but if it does happen the lender will need to verify that the borrower has the ability to pay the new monthly amount. This is one example where credit and income underwriting may be necessary.

Regardless of whether the monthly payment goes up or not, all IRRRL borrowers will be asked to sign a document that certifies they understand how the refinance affects their payments and interest rates. The document shows a side-by-side comparison of the old and new interest rate and monthly payment. Additionally, it will indicate how long it would take to recoup ALL closing costs, including those that are rolled in. This is commonly known as a break-even calculation and can look something like this:

$5,000 (costs) ÷ $50 (monthly savings) = 100 months

Let us help you calculate your break-even point to see if this type of refinance loan is right for you.

What Fees Can Be Rolled In?

With Streamlines, a borrower can roll in all of the allowable fees, such as:

  • The VA Funding Fee
  • All Allowable Fees and Costs (such as lender’s origination fee)
  • Up to 2 Discount Points
  • Appraisal (if required)
  • Credit Report (if required)

When you’re shopping for a Streamline loan, it’s important to understand what lenders are offering. “No-cost” Streamline refinancing just means that the lender pays your closing costs, but generally charges a slightly higher interest rate or offsets the cost in another way. You may be able pay your fees upfront or roll them in for a more competitive rate.

If you’re ready to start your journey with us, fill out this quick 5-minute form, and one of our representatives will contact you ASAP.

VA Streamline Refinance Recap

These are just some of the details of VA Streamline refinance that the U.S. Department of Veterans Affairs outlines on their website:

  • The VA requires no appraisal
  • The VA requires no credit underwriting
  • IRRRLs can be done without “out of pocket” costs two ways: by rolling all costs in, or by charging an interest rate high enough for the lender to pay the costs
  • When switching from a VA ARM to a VA fixed rate loan, your interest rate can go up
  • Lenders don’t have to offer IRRRLs, but you can choose any lender who does to process your application
  • Because lenders’ terms can vary, you are encouraged to shop around
  • IRRRLs are not intended to provide cash to the borrower and borrowers cannot receive cash as part of an IRRRL transaction.

It’s important to note that though the VA has these relaxed guidelines, the lending market can dictate tougher underwriting standards. This is why you may read one thing on the VA website and hear another from your lender.

Even in a market that calls for some credit and income qualifying, Streamlines are typically a more efficient and economical way to refinance an existing VA loan. Here is what may make them the best option for current VA borrowers:

  • VA Funding Fee is just .5%
  • Additional COE is not required
  • Appraisal may not be needed
  • Owner-occupancy is not necessary

American Pacific Mortgage wants you to understand their new loans before signing on the dotted line. If you would like more information about this kind of mortgage give us a call 1-866-663-0826.

Fill out this short form and a mortgage expert will get in touch with you.

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