How does a streamline VA mortgage refinance work for me?

A streamline VA mortgage refinance (or IRRRL) is quite possibly the most simple of all loan programs available today. Qualification for this type of VA mortgage refinance is very simple and because of more limited paperwork the process moves much more quickly than a full qualifying loan (thus the “streamline”). Qualification can be determined with a few easy questions.

1. Is there a benefit to you the veteran? For a VA streamline to be a benefit the borrower must be saving enough money to show a decided benefit.
2. Have you had any 30 day late payments in the past 12 months? No 30 day late payments are permitted for VA streamline qualification.
3. Are you current on your existing monthly mortgage payment? You must be current to qualify for a VA Streamline. Lenders may also impose their own guidelines on a VA streamlines.

In recent months lenders have begun instituting credit and appraisal requirements, as well as their own tangible benefit tests. A loan specialist will be able to explain how these changing requirements may affect your Streamline VA mortgage refinance.

How does a “cash out” VA mortgage refinance work for me?

After some time in their homes, many veterans desire to make improvements to their home, or use the equity to pay other bills. With a “cash out” VA mortgage refinance they are able to do exactly that. While the guidelines are not nearly as relaxed as with a streamline, the “cash out” VA mortgage refinance program is one of a very few remaining programs offering to cash out equity. With the “cash out” VA mortgage refinance veterans enjoy: increased approvals, decreased waiting time, increased flexibility, and the ability to take out up to 90% of the equity in their home for needs that they have now. No other 1st mortgage loan program offers that without paying for mortgage insurance.

Is the VA mortgage refinance at a fixed rate?

A VA mortgage refinance can be processed as either a fixed rate or as a VA hybrid ARM. The Hybrid ARM is fixed for a short period, usually 3 or 5 years, and turns adjustable thereafter. The initial starting rate is generally lower than rates available on traditional fixed rate programs. A VA mortgage refinance can be done at a fixed rate for terms of 15, 20, 25, & 30 years. If a true fixed rate is what you desire, make sure that the final closing documents indicate that.

Does my credit matter with a VA mortgage refinance?

The VA does not have any credit requirements for a VA streamline, or any other kind of VA loan. However, many lenders have instituted their own credit requirements for a VA mortgage refinance. Most of the lenders no require a middle credit score above 640 for a streamline, and closer to 680 for a “cash out”. Although these requirements are in place, it is still far lower for a VA mortgage refinance than any other similar sort of mortgage loan currently available.

What interest rate can I expect on my VA mortgage refinance?

Just as the stock market changes rapidly and frequently, so do the rates available for mortgages. Interest rates vary on a minute by minute basis and therefore it is all but impossible to dictate a rate without first seeing the current market conditions. Whether you choose a fixed rate or a variable for your VA streamline, the rates will be very competitive in comparison to its conventional counterparts. From late 2008 through early 2010 interest rates fluctuated around all time lows, so there is no better time than the present for a VA mortgage refinance, as rates are most certainly going to rebound to rates above what is currently available.

What costs are involved with a VA mortgage refinance?

Be wary of anyone who sells you a mortgage with no fees. All mortgages have costs and fees involved. With a VA mortgage refinance the general fees fit into four categories. The origination charges, VA funding fee, Title fees, and Discount fees. . Origination charges are the fees that the loan officer is paid for performing the service of originating the loan. This is essentially the loan officer’s commission. The VA stipulates that origination fees cannot exceed 1% of the loan value. On a VA mortgage refinance the general rule is a 1% origination fee. The VA funding fee on a VA streamline is 1/2 of 1% (or 0.5%) of the principle amount of the new loan, on a “cash out” can reach as high as 3.3% for a second use. This is waived for a veteran receiving service connected disability benefits, as well as for widows of veterans. Title fees are a bit more difficult to determine for a VA mortgage refinance. Each state has differing requirements as to what can be charged on a VA mortgage refinance. In general the title fees will include all the costs of the legal processing of your VA mortgage refinance. This many include title search and examination charges, and Recording fees charged by the state, county, or city. For a streamline VA mortgage refinance the fees should not exceed 4.5% of the loan amount, but could be as high as 7% for a “cash out”. The loan discount is paid to permanently lower the interest rate on a VA mortgage refinance, and is commonly referred to as “paying Points”. The VA puts a cap of 2% on the loan discount.