Many Veterans are taking advantage of the present low interest rates available to refinance their current VA loan. The Streamline, technically known as the IRRRL (Interest Rate Reduction Refinancing Loan) is a loan designed to take an existing VA loan and allow it to be refinanced to a VA Loan with a lower interest rate. The interest rate on the new loan must be lower than the interest rate on the present loan. The exception to this is where an ARM (Adjustable Rate Mortgage) is being refinanced to a fixed rate mortgage. This is the only scenario where the interest rate is allowed to be higher on the new loan.Qualifying for an IRRRL (Streamline) is relatively simple. The VA does not require an appraisal or minimum credit score for a streamline. The amount of closing costs charged the borrower are regulated by VA guidelines and can be rolled into the new loan. Generally the veteran is eligible if the payments on the present mortgage are current. However, specific lenders have tightened their requirements during the past couple of years so it is wise to check with a lender to see what is required. When the original VA Loan was incurred the buyer was required to live in the home. With a VA Streamline you do not currently have to be living in the home.You do not have to do your IRRRL through the Financial Institution currently holding your VA Mortgage. You can choose any Lender to deal with. Of course you will want a lender who is qualified to do VA Loans and will respond to your emails or calls in a timely manner and takes your refinance as seriously as they would if they were working on their own home loan.As far as Veterans Eligibility goes, the same certificate of eligibility that is on the current VA mortgage is used on the streamline and can be verified online by the Lender handling the loan.This is not a Cash out Refinance and the borrower is not allowed to take cash as a result of the deal. However, there are two possibilities where the borrower can end up with some extra money in addition to the benefit of a lower interest rate. If there is money left in the escrow reserve account for the current mortgage there will be a refund. The amount of the refund could be possibly be around $1,000, more or less depending on the remaining balance at the time of closing. In addition, as a result of refinancing, one or two monthly mortgage payments may be deferred.The length of the Streamline mortgage can be 10-30 years. Veterans who are in a position to refinance from a high interest rate to a lower rate often consider doing a 15 year loan so that the home is paid off sooner. Even with a lower interest rate, the monthly payment generally will go up when changing from a 30 year to a 15 year mortgage. If the borrower can afford the increased monthly payment, a 15 year loan is definitely one to consider because of the long term benefits.Many veterans have taken out a second mortgage on their home and wonder if they can still get a streamline. The answer is yes if the second mortgage holder will sign a subordination agreement.The application process is quick and easy “streamlined” and can be explained by your Lender. Just make sure you are dealing with a Lender and a Loan Officer who is experienced in assisting Veterans with VA Loans, IRRRLs and Refinances.
There are a couple of reasons to consider refinancing. You may need additional cash right now in order to pay for a real need, such as paying college tuition or even remodeling your home, or buying a car (if you pay cash because of a ‘cash out’ refinance loan your mortgage interest is tax deductible…for now) or you may want to take advantage of the much lower interest rates that are available now. The VA has options for both of the above reasons.The first option is a VA Loan for Home Equity Refinancing. This refinance transaction requires repayment of your current mortgage directly from the proceeds of your new VA mortgage. This will be for the same borrower for the same property as on the original loan. A home-owner can refinance up to 90% of the appraised value, plus all closing costs, provided the property can stand up to the designated loan to value ratio. You do not have to own your home for any minimum amount of time, but your home has to have sufficient equity to quality for the loan. Equity is the difference between the market value of your home and the amount you actually owe on it, which includes both your first and second mortgages. You can use the extra money (the equity) to pay off high credit card debt, buy a car, remodel or whatever you need the additional cash for.The second option is a VA Streamline Refinance, sometimes referred to as an Interest Rate Reduction Loan. The sole purpose of this loan is to gain a lower interest rate in order to save money, not only on your monthly mortgage payment, but ultimately over the life of the loan. This program was created by the VA to make this happen with little or no out-of-pocket expenses for the home owner. Either the lender can pay the associated costs in exchange for a slightly higher interest rate or you can roll the closing costs into the new loan. The basics of this program are as follows:
This is only available to veterans who are refinancing their original VA mortgage and who have utilized their original eligibility for their current loan.
No assumptions are allowed
The homeowner cannot receive any cash back from the transaction.
All other liens must be subordinate to the VA’s lien.The VA will not require an appraisal, income or employment verifications, a credit report or a current termite report. The first qualifying criteria is that the current mortgage must have been paid as agreed for the prior 12 months and must not be in arrears at the time of the refinancing.As of July 15, 2010, the VA National Average Interest Rate was 4.617% APR for a 30-year fixed mortgage and 4.704% APR for a 15-year fixed mortgage. If you are currently paying at least half a point more in interest, this may be a viable option that can save you significantly, both on your monthly living expenses and over the life of the VA loan. You can also buy down the loan interest rate by paying points, which could make this an even more lucrative option.To get started, either contact your current lender, or another lender of your choice. This could easily be one of the smartest decisions you will make and the VA has made it so much easier for those eligible persons than what a non-veteran faces with the current economy. What are you waiting for?
There are many reasons to refinance mortgages. Borrowers often refinance when interest rates drop. As little as one-quarter percent decrease can save homeowner’s thousands of dollars over time. Refinancing provides cash back which can be used to pay off credit card debt, student loans, home improvements, financial investments or vacation.Borrowers who refinance mortgages pay off their original home loan by taking out a new loan. Homeowners can obtain refinancing through their current lender or shop around for the best home mortgage rates.Borrowers with FICO scores of 750 or higher have the benefit of obtaining financing from nearly any lending institution. Borrowers with less than perfect credit may find it challenging to refinance through conventional lenders.Qualifying factors for home loan refinancing include employment history, financial ability to repay the home loan, appraised property value, and debt-to-income ratio.Think about other types of lending institutions when comparison shopping for mortgage companies. Credit unions and thrift institutions sometimes provide lower interest rates and are more open to refinancing mortgages for people with bad credit.Individuals who don’t have time to shop around for best refinance rates might want to use the services of a mortgage broker. It is important to work with brokers well-established within the lending industry, as they are swiftly able to locate suitable lenders.Mortgage brokers are required to be licensed in each state they conduct business. Clients must sign a contract authorizing brokers to act as their agent. Mortgage brokerage fees are charged in addition to loan application, origination, and closing settlement fees.It is a good idea to shop brokers and compare mortgage refinancing fees. The best source for locating licensed brokers in the United States is the National Association of Mortgage Brokers at namb.org.Homeowners should calculate all costs associated with refinanced mortgages. Most mortgage notes and trust deeds include a prepayment clause and assess penalties when loans are paid off early. In most cases, closing costs will be assessed on the new loan.The initial expense of mortgage refinancing can be recovered over time through reduced monthly payments. While settlement costs can be $4,000 or more, refinancing could save homeowners $40,000 over the term of the note.Individuals who need help understanding the advantages and disadvantages of mortgage refinance should consult with lenders, brokers, credit counselors or housing counselors. The Department of Housing and Urban Development (HUD) provides a nationwide list of housing counselors at hud.gov.Homeowners with FHA loans might qualify for the Streamline Refinance program. Borrowers who qualify under the Federal Housing Administration guidelines can refinance mortgages without undergoing the credit qualification process.