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VA Streamline Refinance (IRRRL Program)
The VA streamline refinance is the quickest, cheapest, and most beneficial type of refinance for veterans who currently have a VA home loan. VA refinance rates are at historic lows. If you are interested in reducing your interest rate and monthly payment, it’s worthwhile to check current VA streamline rates.
The VA streamline is one of the only refinance programs available in 2018 that allow you to qualify without income or bank account verification. It’s available to those with less than perfect credit. It is one of today’s quickest and easiest refinance options.
What is a VA Streamline Refinance Loan?
The VA streamline helps veterans lower their mortgage rate and payments. When rates are low like they are now, veterans can refinance into a new loan based on today’s rates, and often reduce their monthly payment quickly and easily.
This loan type, also called the Interest Rate Reduction Refinancing Loan (IRRRL) eliminates many of the roadblocks that hold up applicants on other types of refinances. The VA Streamline is much easier because:
- No paystubs or W2s are required
- No bank statements are required
- No home appraisal is required
- There is no loan-to-value limitation because no appraisal or value is required.
- Underwater homes are eligible
- The required funding fee is lower than for VA purchase loans
- Closing costs can be wrapped into the new loan, meaning little or no out-of-pocket expenses
Why is this loan so easy to obtain? Homeowners with a VA loan are more likely to make payments on time if their payments are lower. It benefits everyone when veterans have affordable mortgage payments.
Current VA Refinance Rates
VA streamline refinance rates are at historic lows. Many Veterans who have purchased or refinanced a VA home loan in the past few years should check today’s VA rates to make sure they have the absolute lowest rate and monthly payment possible.
If you’re interested in a VA Streamline (IRRRL) you must currently have a VA loan. Your mortgage professional will pull a Prior Loan Validation from VA’s website to prove current VA loan status. There are some additional requirements.
In addition, you are required to have made on-time payments over the past year, with no more than one payment that was 30+ days late in the past 12 months. If you did have a late payment, say, 8 months ago, you may want to wait 4 months before applying.
The VA Streamline Refinance Must Improve Veteran’s Situation
The VA streamline has to put the borrower in a better financial situation. VA lenders may only approve streamline refinances that help the veteran.
The new payments on the VA streamline must be lower than your current payments. There are a few exceptions, like when you:
- Refinance an adjustable rate mortgage (ARM) to a fixed rate mortgage.
- Refinance into a shorter term
- Finance energy efficient improvements into the VA streamline
In all cases except for an ARM refinancing into a fixed rate, the interest rate must decrease.
To prove the benefit of the refinance, your lender will provide you with a form stating the interest rate and payment of your current loan compared to the rate and payment of the new loan. The form will also state how long it will take the refinance to pay for itself. For instance, if the refinance will cost you $3000 in closing costs, but you are saving $300 per month, you will make back the cost of the refinance in 10 months. Be sure to review this form to make sure you are receiving an adequate benefit from the refinance. Talk to one of our VA experts to determine your refinance payback time frame.
You must certify that you previously occupied the home that you are refinancing with a VA streamline. Those applying for a VA streamline are more likely to qualify if they currently live in the home.
There are still instances where you may still qualify if you don’t live in the home. For example, if you lived in the home, then relocated and rented it out, you still may be able to apply for a VA streamline. Speak with your lender for more information.
VA Streamline Funding Fee
The VA funding fee is required on most purchase and refinance VA loans to defray the costs of the VA home loan program. In most cases, the VA Streamline funding fee is 0.50% of the new loan amount. This fee can be financed into the loan so that the veteran does not have to pay it at closing of the loan.
The fee is waived for veterans who are disabled due to service-related injuries. The VA makes this determination and provides it to the lender.
The 0.50% fee is much less than the 2.15% or 3.3% usually required for purchase or VA cash out refinance loans.
The VA streamline is not viewed as a subsequent use of your VA home loan benefit. You will not incur the 3.3% subsequent use fee because you used the VA streamline refinance program.
This loan does not use any of your VA home loan entitlement, nor do you have to prove remaining entitlement to obtain a VA streamline. Your remaining VA entitlement after purchase of the home, if any remains, does not change when you obtain a VA streamline.
Loan Terms and VA Streamlines
As discussed previously, your VA loan term may decrease, for instance, from 30 years to 15 years. In this case, it’s OK that your payment increases.
You can also refinance a 15 year loan into a longer term loan. However, keep in mind that the most your loan term can increase is 10 years. So if you currently have a 15 year term, the longest loan you can refinance into will be 25 years.
VA Streamline Q&A
Can I refinance my Home if it’s Underwater?
Yes. The VA streamline does not require an appraisal, therefore no value is established for the property. The basis for the loan is the existing VA loan, not the current value of the property.
Do lenders impose additional rules for VA streamlines?
Yes. Often, lenders will impose “overlays,” which are additional guidelines on top of VA’s requirements. Each lender has the right to establish their own standards for lending on VA loans.
For instance, the VA does not require an appraisal or credit report. But almost all lenders require a credit report, and many require an appraisal for a VA streamline. If you are worried about the value of your home or the cost of the appraisal, find a lender who will complete the loan without an appraisal.
Do I need my COE for a streamline?
No. Your Certificate of Eligibility (COE) is needed for your VA home purchase, but not for a streamline. Since you already have a VA loan, most lenders will simply request a prior loan validation directly from VA’s website in lieu of a COE. If you have questions about your COE, contact us.
Can I add or remove anyone from the mortgage with a VA Streamline?
In some cases, parties can be added or removed. The general rule of thumb is that the veteran who was eligible for the original loan must remain on the loan. The exception is when a spouse and veteran are on the existing loan, and the veteran passes away. In this case, the spouse may be able to refinance with a VA streamline without the eligible veteran.
What if the VA streamline raises my payment?
The payment is allowed to rise as a result of the VA streamline in some cases. In the very rare case that the new payment goes up 20% or more because of these features, the lender may ask for full income documentation. Usually the payment does not rise that dramatically because of the below factors:
- ARM to Fixed Rate
Because fixed rate mortgage generally have higher interest rates than adjustable rate mortgages (ARMs), your payment may go up. But, often it is a good trade off to know that your payment won’t change over the life of the loan like it can with an ARM.
In some cases, your rate and payment may even go down if your ARM interest rate is higher than today’s low fixed rates.
- Shorter Term
The VA streamline allows you to refinance from a 30 year loan into a shorter term, such as a 15 year term. In this case, it’s OK for your payment to rise as long as your interest rate goes down. Since shorter term loans pay off faster, payments are bigger than loans with longer terms.
- Energy Efficient Improvements
As an added benefit, the streamline refinance program allows home owners to finance up to $6000 in energy efficient improvements for their home. These improvements will save home owners money over time and are a great option for those who are interested in upgrading and adding value to their home. Some examples of energy-efficient items are programmable thermostats, insulation, solar heating, and caulking/weather stripping.
In some cases, the veteran may receive cash at closing of a VA streamline for reimbursement of energy-efficient items. Check with your lender for details.
What if I have a Second mortgage?
Second mortgages on VA loans are fairly rare, since VA loans do not require a down payment, and therefore not enough equity exists to obtain a second mortgage.
In the case that there is a second, the new VA loan from a streamline can’t pay it off. A VA cash out loan would be required. Any additional loans on the property need to be “subordinated,” or put underneath on title, behind the new VA loan.
Can I get cash at closing with a VA streamline?
No. VA streamlines are meant only to pay off the existing loan and closing costs. The only exception is when a veteran prepays for energy-efficient improvements and needs to be reimbursed for actual costs.
Should I apply for a VA streamline with my current lender?
Although your original lender or current mortgage servicer might be able to do your VA streamline, it is not required. Any VA-approved lender can do your streamline, and it’s best to check with a few lenders to compare interest rates and fees.
Is VA streamline the same as HARP 2.0?
No. HARP 2.0 is a refinance for loans owned by Fannie Mae or Freddie Mac. Fannie/Freddie do not own VA loans, so a HARP loan can’t refinance a VA loan.
Can I refinance my VA loan with a new conventional loan?
Yes, if you have enough equity and meet other qualification standards for conventional loans. If you have 20%+ equity in your home, it would be possible to open a new conventional mortgage without a funding fee or mortgage insurance, to refinance the current VA loan. This type of loan would require an appraisal and full income, asset, and credit underwriting.
What are the closing costs on a VA streamline?
Closing costs vary greatly from lender to lender. Borrowers should shop around to find the best interest rate and closing cost combination for them. There are certain closing costs the veteran can and cannot pay on a VA loan. For an in-depth look at closing costs, see our closing cost page. Generally, rules for VA streamline closing costs are the same as for purchase closing costs, except that the veteran may not finance more than two discount points (2%) into the new loan. Discount points are points paid to reduce the interest rate. For a closing cost quote based on your specific situation, contact a licenced VA lender.
Can the lender pay my closing costs instead of including them into the new loan?
In some, cases, the lender can give you a higher interest rate and pay your closing costs, and sometimes even your funding fee. The closing costs aren’t added to the loan amount; the lender pays them for you by using the excess profit from the loan. Usually this works best when rates are very low, or if you currently have a high interest rate. In these cases, you lower your rate substantially, despite the rate hike given to you to pay for fees.
For instance, if market rates are 4.0%, your lender might give you a 4.25% rate and pay all your closing costs. You still end up with a great rate, and don’t add much principle to the loan balance. This isn’t always an option, though, and often closing costs need to be wrapped into the new loan or paid in cash.
Can I skip a payment by getting a VA streamline?
No payments can be skipped. Sometimes, depending on the closing date of the new loan, it appears that a payment has been missed because the previous or subsequent month’s interest was wrapped into the new loan. However, the VA does not condone this practice as a method to “skip” a payment. The VA lender should not coach the borrower to structure a refinance in this way.
How do I know if market rates are lower than my current rate?
The amount of money that you can save with a VA streamline refinance varies with the current VA interest rates that change based upon the normal market fluctuations. You should look at the current VA rates displayed on our site and match them against the rate you got when you initially got your VA loan. If the rate is lower than what you are currently paying, there’s a strong chance that you can save money with a VA streamline refinance loan.
Can I use a VA streamline to refinance another type of loan?
No. VA streamlines or for VA to VA refinances only. If you have a conventional, FHA, USDA, or other type of loan, you could possibly use a VA cash out refinance. You would need an appraisal, and income, asset, and credit documentation.
I’m Ready to Apply for a VA Streamline. What’s my Next Step?
Call (866) 240-3742 or simply complete our online form for a free, no obligation VA streamline rate quote. Rates are low and it’s a great time to lower your home payment.
Source of information on this page: VA Handbook