A VA loan makes homeownership more attainable for service members, veterans, and their spouses. These financial products don’t have any down payment requirements and also come with no private mortgage insurance. They’re also easier to qualify for than other types of mortgages.
However, some borrowers want to secure different rates and terms for their mortgages in the future. Some homeowners refinance to access home equity, while others refinance their loans to secure lower interest rates. If you have a VA loan, you can opt for a streamline refinance to reduce your monthly payments.
What is the VA Streamline Refinance Program?
The VA Streamline Refinance Program helps borrowers receive lower interest rates on their VA loans. This refinance doesn’t require as much paperwork, which makes it less complex and quicker than a traditional refinance.
How Does a VA Streamline Refinance Work?
You can only use the VA Streamline Refinance if you already have a VA loan and don’t want to take out any cash. This program is specifically for obtaining a lower interest rate. You can also use a streamline refinance to switch from a variable-rate loan to a fixed-rate loan. However, you cannot convert a fixed-rate VA loan into a variable-rate VA loan.
Who is Eligible for a VA Streamline Refinance?
The VA Streamline Refinance is a straightforward process, but it’s not for everyone. These are the program’s requirements.
Who Can Apply?
Homeowners who already have VA loans and can confirm that the property is a primary residence are eligible for a VA streamline refinance. You can only use this financial product to refinance an existing VA loan instead of a conventional mortgage.
Loan and Property Requirements
Homeowners can only use an IRRRL VA refinance on a primary residence. This financial product is not applicable for vacation homes or investment properties. Furthermore, the loan can have a lower rate or a fixed rate instead of a variable rate.
Service and Credit Score Criteria
The homeowner must have been a service member, veteran, or spouse of a service member or veteran. Some lenders also require that you have a minimum credit score to get a refinance. However, the process is less cumbersome than other types of refinances, and it’s possible to get a VA streamline refinance with no minimum credit score requirement.
What are the Benefits of a VA Streamline Refinance?
A VA streamline refinance offers several perks for homeowners. These are the highlights.
Lower Interest Rates
A VA Streamline Refinance can help you secure a more favorable APR for your mortgage and free up space in your budget. You can also secure a fixed interest rate instead of having a fluctuating APR.
Reduced Monthly Payments
A lower interest rate translates into lower monthly payments. You can use the savings to cover other expenses or pay off your mortgage faster.
No Appraisal Needed
You don’t have to go through a lengthy appraisal before the refinance. Homeowners can save money leading up to the IRRRL Streamline Refinance and then end up with a lower rate as well.
Limited Documentation Requirements
It’s much simpler to get a VA Streamline Refinance than a traditional refinance. You don’t have to provide as much documentation for this financial product.
Are There Potential Drawbacks and Considerations?
No financial product is perfect, and there are some disadvantages to consider before getting this type of refinance. Here’s what you should know before committing to a VA Streamline Refinance.
Costs and Fees
You will have to pay a VA funding fee for a streamline refinance. You will also have to contend with some closing costs.
Potential Increase in Loan Term
Some homeowners may extend their loan duration to minimize monthly payments, but this approach can keep them in debt longer. Interest continues to accumulate on a lengthy loan and can impact your ability to achieve long-term financial goals.
Limitations on Cash-Out
IRRRL refinances don’t offer much flexibility with cash-out refinances. You’ll have to seek a different type of refinance if you want to tap into home equity.
The VA Streamline Refinance Process
The VA Streamline Refinance process may sound complex, but it’s more manageable if you break it down into a few steps. Here’s what you can expect during the process.
Initial Consultation and Pre-Approval
You can submit a pre-approval application online or by phone with multiple lenders. Jumping on an initial consultation just before this step can give you additional clarity about the best way to proceed with this financial product.
Submitting the Application
After you get pre-approved, you can submit applications for a VA streamline refinance. Comparing rates and terms from multiple lenders will help you save money in the long run.
Underwriting and Approval
Underwriting and approval don’t take as long as other types of refinances. Streamline refinances are more simplified and require less paperwork.
Closing the Loan
Once you close on the loan, you will have to cover any applicable closing costs plus the VA funding fee. Then, you will have a lower interest rate on your new loan.
How to Choose the Right Lender
Consumers can choose from many lenders. Here’s what you should consider before partnering with a lender and choosing an offer.
VA-Approved Lenders
You will have to filter your search to VA-approved lenders. VA loans are nonconforming and aren’t offered by every financial institution.
If you’re still looking for a VA-approved lender, The Federal Savings Bank is here to guide you through the process. With their extensive experience in VA loans, they can help you evaluate whether a refinance is beneficial for your financial situation. Whether you’re looking to lower your interest rate, shorten your loan term, or tap into your home equity through a cash-out refinance, their team is dedicated to helping you make informed decisions.
Get in touch with a refinance loan specialist from The Federal Savings Bank by answering a few simple questions to learn more about their VA loan refinancing options and see how they can assist you in achieving your financial goals.
Comparing Rates and Offers
It’s important to compare rates and terms from multiple VA lenders instead of accepting the first offer you find. The APR is critical, but other factors like the loan’s duration and fees should also influence the decision.
Customer Reviews and Reputation
While any lender will tell you that they’re the best, online reviews give you a better idea of the truth. If a VA-approved lender has many positive customer reviews and a good reputation, that lender may be a good choice.
Comparison with Other Refinancing Options
A VA Streamlined Refinance is one way to end up with lower monthly payments for your loan, but there are alternatives. These are some of your other refinancing options.
VA Cash-Out Refinance
A VA cash-out refinance lets you adjust the rate and terms of your VA loan. You can also tap into your home equity to cover other purchases.
Conventional Loan Refinance
Conventional loan refinances let you do the same things as VA refinancing options. You can keep the same loan duration but end up with a lower rate, and you can also switch from a variable-rate to a fixed-rate loan. Cash-out refinances let you access home equity. However, you can also turn a fixed-rate into a variable-rate loan. Furthermore, you can use a conventional loan refinance to shorten your loan term and get out of debt sooner.
FHA Streamline Refinance
An FHA streamline refinance makes refinancing more accessible for homeowners who don’t have the best credit. While a VA streamline refinance is typically the better option, this financial product is useful for people who currently have FHA loans for their homes.
Tips for a Successful VA Streamline Refinance
A successful VA refinance can save you a lot of money in the long run. These tips will help you work out a successful refinance.
Preparing Your Documents
VA streamline refinances don’t require as much documentation as other types of refinances, but you’ll still have to provide basic information like your ID and Social Security Number. VA-approved lenders outline which documents are required during the process.
Timing Your Refinance
Some lenders require that you have a minimum credit score to receive a VA streamline refinance. It’s a good idea to avoid any hard credit checks leading up to a refinance.
Communicating with Your Lender
Most VA streamline refinances take less than 30 days. Communicating with your lender to ensure you have provided the necessary documents and periodically checking on progress can ensure a quick process.
Is VA Streamline Refinance a Good Idea?
A VA streamline refinance is a great option for people who want to reduce their interest rates and end up with lower monthly payments. However, this financial product isn’t free. You will have to assess the closing costs and VA funding fee to determine if it is a good choice. It’s also important to review your financial situation before getting started.
Frequently Asked Questions (FAQ) About VA Streamline Refinances
The current VA streamline refinance rates are 5.99% APR for a 30-year streamline refinance.
You must wait at least 210 days from your last loan’s closing to apply for a VA streamline refinance.
It can take up to 30 days for most VA streaming refinances.
