The VA streamline is currently the best loan option for veterans in the market to refinance their home loan. Many veterans are currently in high-interest rates and should be refinancing their current VA loans to a fixed 3.75% rate for 30 years. With interest rates at an all-time low, now is the time to get locked into a low-interest rate and save hundreds of dollars every month. Many lenders, including GMAC, offer VA streamlines for veterans. VA streamline means that a veteran homeowner currently has a VA loan and is looking to refinance to a lower interest rate. Since many lenders offer the VA streamline it’s important for veterans to research and understand credible lenders and brokers to assist them.
A common misconception among veteran homeowners is that home loan brokers will result in more closing costs and higher interest rates. This is false. On the contrary, many brokers actually offer lower interest rates than lenders and no additional closing costs. Lenders like GMAC are willing and able to offer these brokers large discounts because of the volume of loans they are closing.
To bring the point home, let’s compare the lender and broker relationship to the home improvement store Home Depot.
Home Depot buys millions of dollars of hardware, appliances, paint, and other home improvement items from hundreds of companies across the nation. Because Home Depot buys these items in bulk, the wholesale companies selling to Home Depot offer them a cheaper price range then someone only buying one item. These wholesale companies give Home Depot a bulk discount since they buy so many items and understand the discount is well worth the company’s time to receive the business of Home Depot. If someone directly contacted the wholesaler to get one item from them would they be paying less than at Home Depot? Not necessarily. Since the customer would only be buying one item they would have to pay a higher rate and not qualify for the bulk discount that Home Depot receives.
The lender to broker situation is very similar. Since many brokers close thousands of loans they offer bulk discounted rates because the discount is well worth it for the lender. The broker is providing the lender with a large amount of business and profit. Consequently, going directly with the lender does not necessarily mean a veteran homeowner will be getting the lowest interest rate on the market.
GMAC Approved Brokers
There are many brokers across the nation that are approved by GMAC. Many of these brokers have access to the “wholesale” or “tier 1” rates. These rates are typically better than going directly to the lender. If a veteran goes directly to GMAC to refinance, they are not guaranteed to get the “wholesale” rate, but will typically receive the “retail” rate which will be a higher interest rate. Just like our example with Home Depot, GMAC is forced to give higher rates to single customers but can offer discounts through large brokers closing a lot of loans.
How can veterans ensure they are getting the best deal and service?
Below are three things to take into consideration before going with a lender or broker. These three things can make all the difference for veterans looking for a hassle free refinance.
1) Go with a lender or broker that has experience with VA Loans
This sounds like a pretty simple statement, but many lenders are unfamiliar with VA loans and steer veterans into worse loans. VA Loans are hands down the best loan on the market right now. If any lender of broker says otherwise, they do not have experience working with VA loans.
2) Research the difference between a fixed and hybrid loan
Typically when an adjustable loan is mentioned everyone cringes. However, VA Hybrid loans have VERY different rules than the conventional adjustable loans that flooded the market 5-10 years ago. Many people don’t understand that the VA Hybrid loan is actually fixed for 5 years. For veterans who are very sure they will be in their current home for less than 10 years, the VA hybrid loan can be the best option. Rates for VA Hybrid loans are as low a 2.75% and cannot raise more than one point per year after the first five fixed years.
3) Sometimes the lowest interest rate is NOT the best option
Make sure to understand your break-even point when streamlining your VA loan. Many times homeowners assume the lowest interest rate is always the best option for them. If a homeowner is only going to be in a home for the short amount of time, higher interest rates may be a better option. Why? If the break-even point for a loan is 6 years with a 3.75% or 4 years with a 4.25% and the homeowner is only going to be in the home for 5 years then the 4.25% interest rate is going to be a smarter loan for that situation. The closing costs for a VA streamline are typically rolled into the loan and the monthly savings help offset the costs of the refinance.
If you have any other questions or concerns about streamlining your current VA home loan, contact a loan officer at LowVARates.com for assistance. They can help you understand the best loan for your situation.
As always veterans, make sure to check VA Streamline rates through GMAC, LowVARates.com and other brokers and lenders to see which can offer you the best streamline refinance for your situation.