How VA Streamline Refinance Works
The VA streamline refinance offers a reduced cost, reduced paperwork solution to help eligible Veterans take advantage of lower rates without the cost of refinance your home.
Eligible Veterans have the ability to purchase a home using their VA home loan benefit with no money down, and very little, if any money out of pocket.
For those Veterans that already have a VA loan, you have the access to a unique feature that allows you to “streamline” you loan to reduce your interest rates and payment.
Government insured loans like FHA and VA home loans have a built in feature that allows a homeowner to refinance this mortgage to a lower rate and payment without all of the paperwork and cost of a standard refinance.
The streamline program for homeowners with a VA home loan is called an Interest Rate Reduction Refinance Loan, or IRRRL (pronounced “earl”).
Benefits of a VA Streamline Refinance
Reduced Appraisal Requirements – In most cases, an appraisal is not required for a VA Streamline refinance. In some cases however, an exterior only appraisal may be required to make sure the home is still there, and there are no obvious health or safety issues. If this type of appraisal is required, there should be little to no cost to the Veteran.
No Income Verification – Eligible Veterans are determined by the payment history on your current VA home loan, not your income. As a result, your Debt to Income Ratio is not a factor when refinancing using a VA IRRRL, and only your employment will be verified, not your income.
Reduced Funding Fee – As a Veteran, part of your home loan benefit is that you can borrow up to 100% of the value of a home without paying mortgage insurance. The VA does charge a Funding Fee equal to a percentage of the loan amount.
When using an Interest Rate Reduction Refinance Loan, you will pay a reduced funding fee of .50% of the loan amount, which is less than half of the cost of a standard purchase or refinance.
Veterans with service related disability may be eligible to have the IRRRL funding fee waived, which also applies to any funding fees for VA standard purchase or refinance financing.
Qualify for a VA Streamline Refinance
For the most part, as long as you do not have any major credit challenges and you’ve made your mortgage payments on-time, you will find this process pretty easy.
Credit Score – 640 minimum credit score for loan amounts up to $417,00. A 660 credit score is required for loan amounts above $417,000.
Mortgage Payments – Your mortgage payments must have been on-time, and show 0 x 30 days late for the last 12 months. If you’ve made payments late, but not greater than 30 days late, and it does not show as 30 days late on the credit report, then you are eligible for a streamline refinance.
New Mortgage Payments – Your new mortgage payments must be less than what you are currently paying to be eligible for this refinance. Cash out is not allowed. A VA Streamline refinance can only be used to save you money by reducing your rate, payment and/or loan term. If you reduce the term of your loan, your payments cannot increase greater than 20% from where they were at the longer term.
Occupancy Requirement – Owner occupied homes are eligible, as well as Second Homes or Investment properties with VA financing as long as you can provide a letter of explanation and proof that the home was your primary residence at one time in the past.
Ask an Expert
Recent changes to the VA streamline program was aimed at preventing predatory lenders from targeting Veterans for multiple refinances. This practice of serial refinance costs can strip the equity from the home, and is not in the Veteran’s best interest.
It’s important that you work with a VA loan expert if you’re considering buying or refinancing. Leave me a question or comment below and I promise to respond quickly!