Restructure your VA Home Loan
Homeowners who are veterans or active service members of the United States Armed Forces (who bought their home using a VA loan) have access to one of the most beneficial refinancing solutions -- the VA Streamline refinance program. The VA Streamline refinance loan is specifically tailored for VA loan holders who want to reduce their interest rates.
What is the VA Streamline Refinance Loan?
If you bought your home using a VA loan, then you could benefit further from VA Streamline refinancing. The VA Streamline refinance program, also known as the interest rate reductions refinance loan (IRRRL) or “VA to VA loan”, is available to holders of VA loans only.
It's a lot like the FHA streamline refinance program, in that you don't need the usual documentation required by lenders when applying for refinancing -- like proof of income, employment verification, or credit score verification. You don't even need to get your home appraised.
Once you have already qualified for a VA loan, refinancing through the VA streamline loan program is a hassle-free way to reduce your monthly payment and accumulate some pretty big savings. After all, VA loans boast flexible eligibility requirements and no private mortgage insurance (PMI) on top of highly competitive interest rates rates.
Why you should Consider the VA Streamline Refinance program:
VA streamline refinancing is one of the few refinance options available that allow you to qualify without proof of income or bank account verification. It is even readily available to homeowners with poor credit. Ultimately, It is one of the simplest and most reliable refinance options. In addition, closing costs can be rolled into the cost of the loan -- meaning that if you're eligible, you can get refinance with the VA Streamline program with no out of pocket expenses!
Refinancing with VA Streamline will allow you to secure more favorable terms on your VA loan. You will be able to reduce your monthly payments or improve other terms, like:
- A reduction in the interest rate (e.g. from a 6% 30 year mortgage to a 4% 30 year mortgage)
- A reduction in the term length (e.g from a 30 year mortgage to a 15 year). This may increase your monthly payments, but you save on total interest paid in the long run
- Changing from an adjustable-rate mortgage to a fixed rate mortgage before the market rates move up
A VA Streamline refinance loan does not require an appraisal, so it is possible to qualify even if you're underwater on your loan. The refinance also allows you to borrow up to $6,000 to make energy efficiency improvements on your home.
VA Streamline Refinance Pros:
- It is possible to roll all possible costs and fees into the loan along with the principal. This makes it beneficial for those who would otherwise not be able to afford the out of pocket costs.
- The VA doesn't require credit checks to qualify for the refinance.
- No appraisal is required, so you save money because there is no appraisal cost.
- You can make long term savings by reducing the term of the loan, although this will increase your monthly payment amount.
- If you have assumed (bought) a VA loan backed mortgage you still qualify for refinancing with an IRRRL.
- The VA funding fee can be rolled into the loan or completely wavered for disabled vets.
- You can finance energy efficiency home improvements, which if used with other state and local grants can create huge savings for you.
FHA Streamline Refinance CONs:
- No cash out. You can’t use the VA Streamline refinance loan to draw cash from your home equity.
- Only VA loans can be refinanced through the program, you cannot use the VA Streamline Refinance loan on any other type of mortgage.
- Proceeds cannot be used to pay off any other loan even if it is a second mortgage on the home.
- You may still be required to pay the VA funding fee.
How to Qualify for the VA Streamline Refinance Program
The VA Streamline refinance program is well known for having removed many of the obstacles homeowners face when looking to refinance. Unlike other refinance options, this program eliminates the need for pay stubs, W2s, and costly appraisals. There is even no limitation on loan to value (LTV) ratio. To qualify for a VA Streamline refinance loan you must:
- Currently have a VA home loan
- Display that you have made payments on time for at least a year
- Prove that the VA Streamline Refinance will be a net benefit to you
- Your new monthly payment for the VA IRRRL must be lower than your previous VA loan’s monthly payment. (This condition doesn't apply if you refinance an adjustable rate mortgage to a fixed rate mortgage.)
- Prove that you currently live in the home. You may still qualify in a few circumstances, like if you used to live in it before renting it out.
In addition, you can't receive cash out from the refinance in this program. But that's it! Although the VA’s requirements are few and easy, it is important to note that lenders may add their own requirements. For that reason, you'll get varying offers from different lenders. Even if one lender disqualifies you another may accept you, so shop around for a deal.