How does a VA streamline work for me?

A VA streamline (or IRRRL) is one of the most simple of all loan programs available today. Qualification for a VA streamline is generally very simple and the process moves much more quickly than a full qualifying loan (thus the “streamline”). Qualification can be determined with a few easy questions.

1. Are you current on your existing monthly mortgage payment? You must be current to qualify for a VA Streamline.
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. 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. Lenders may also impose their own guidelines on a VA streamline.

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 VA Streamline.

Is a VA Streamline a Fixed rate?

A VA streamline can be either a fixed or a variable rate product. Depending on the market conditions both types of loans can be equally advantageous. If a fixed rate is what you are aiming for, be sure that your loan officer is aware and that your final loan paperwork indicates that your VA streamline is at a fixed rate.

Does my credit matter with a VA streamline?

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 streamline loan. Most of the lenders no require a middle credit score above 640. Although this requirement is in place, it is still far lower for a VA streamline than any other sort of mortgage loan currently available.

What interest rate can I expect on my VA streamline?

Interest rates vary on a minute by minute basis. Just as the stock market changes rapidly and frequently, so do the rates available for mortgages. From late 2008 through early 2010 interest rates have fluctuated around all time lows. 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.

What is a hybrid VA streamline?

When the VA decided to create the hybrid and make it available for a VA streamline they formed an adjustable rate loan with many of the characteristics of a fixed rate loan. From a fixed rate they took the stability of payments, albeit on a shortened scale. A hybrid VA streamline is fixed for a shorter period of time, usually 36 to 60 months. They also pulled from adjustable rate loans the increased savings afforded with a lower interest rate. To protect the borrower the VA placed specific caps on the interest rate once it moved to a variable. A Hybrid VA streamline is a perfect choice for active duty servicemen who are likely to move in the next 5 years, as well as for those who want to free up monthly expenses in an effort to pay off other debt more quickly.

What costs are involved with a VA streamline?

All mortgages have costs and fees involved. Be wary of anyone who sells you a mortgage with no fees. Bankers and brokers all enjoy being paid and rest assured they are making their money somewhere. Costs can be hidden in junk fees, or they may be being paid outside of the closing in the form of commissions from the lender to the broker for the sale of a higher rate. With a VA streamline the general fees fit into four categories. The VA funding fee, Title fees, Discount fees, and origination charges. The VA puts a cap of 2% on the loan discount. This is commonly referred to as “paying points”. These are fees paid to permanently lower the interest rate on a VA streamline. The VA funding fee on a VA streamline is 1/2 of 1% (or 0.5%) of the principle amount of the new loan. This is waived for a veteran receiving service connected disability benefits, as well as for widows of veterans. 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 streamline the general rule is a 1% origination fee. Title fees are a bit more difficult to determine for a VA streamline. The VA has not set any general guidelines for Title fees. Each state has differing requirements as to what can be charged on a VA streamline. In general the title fees will include all the costs of the legal processing of your VA streamline loan. This many include title search and examination charges. Recording fees charged by the state, county, or city. Document preparation and closing fees, for the time of the escrow officer conducting the closing. As well as the costs of the title insurance itself. Title insurance is required on any real estate transaction to protect both the borrower and the lender from liens against the property. By and large the total of all fees included in a VA streamline should not exceed 4.5% of the total loan value (or slightly higher if your state has high taxes for mortgage recording).