You have a VA loan and want to lower the interest rate. Good news! You are in luck. There is a simple refinance program you can use. The VA Streamline offers the ability to lower your interest rate and/or payment with little work involved. Now the bigger question, which lender do you use? Must you use your local lender? We discuss your options below.
Comparing the Local Lender and Others Too
Our suggestion is to shop with many lenders. You are not restricted to any one lender. You don’t even have to use your current one. As long as you still have VA entitlement, you can use any VA approved lender. This, of course, assumes you qualify for the streamline program. It’s not hard to do. We will discuss the requirements below.
The benefit of comparing your local lender to many others is simple – you get the best deal. Who’s to say the lender down the street offers the best interest rate? What if they have high closing costs? Maybe they have several lender overlays that will make the process more difficult. Don’t settle – shop around.
The Benefit of the VA Streamline
You might wonder what the benefits of the VA Streamline loan are and is it worth it? If we told you that you could save money every month, what would you say? Most people jump at the chance. The VA IRRRL makes it even easier, though. Normally, for a refinance, you must verify your standard qualifying factors. Income, assets, credit score, and home value are among those requirements. The VA IRRRL doesn’t require any of them. You can refinance based on just a few simple factors.
Aside from the easy qualifying, the VA Streamline offers low interest rates and low closing costs. Again, this varies by lender. The VA does monitor the closing costs charged, but every lender is different. For instance, they can charge an origination fee. Not all lenders charge this, though. If you shop around with someone other than your local lender, you may find a cheaper alternative.
Qualifying for the VA Streamline
Qualifying for the VA streamline is simple. Here we discuss the minimal requirements.
- Timely mortgage payments – This is the largest requirement. You must have timely payments for the last 12 months. This means your current VA loan shouldn’t have any late payments. If there is one, it can’t be more than 30 days late. It also shouldn’t be within the last 3 months. Of course, no late payments are best, but many lenders let you get by with one late payment. Again, shop around to find out.
- Owner occupancy – This one is tricky. Technically, you don’t have to live in the home to refinance with the VA Streamline. But, you do have to show you lived there when you had the current VA loan. It is a part of the VA loan agreement. The VA does understand that life happens and people get transferred. If this is the case, you can still benefit from the streamline program as long as you can prove prior occupancy.
- A benefit for refinancing – You must also have a benefit for the refinance. This isn’t hard to meet. Who would want to refinance if there wasn’t a benefit? There isn’t a specific number you must hit. You just need to have a lower payment and/or interest rate. The exception, however, occurs when you refinance from an ARM to a fixed rate. Your rate may be higher. Your payment may even be higher. Try to keep it less than 20% higher and you can still use the streamline program.
What About the Appraisal?
Many people think the appraisal will kill their chances of a VA streamline refinance. They are upside down due to the declining housing industry and can’t refinance. Good news! The VA doesn’t require an appraisal. They don’t care if you are upside down. You already have a VA loan. If you pay it on time, that’s all they care about. They will refinance you into a lower payment loan. Yes, you are still upside down, but the payments may be easier to make. You may also pay the principal down a little faster because you pay less interest. It’s a win-win for everyone involved.
We highly encourage you to shop around for your VA Streamline. Don’t assume your current lender has the best deal. They probably don’t. They already have your business. They don’t have to try to lure you in with a good deal. New lenders may have better offers.
Get quotes from at least 3 lenders. Then compare them side-by-side. Some lenders itemize the closing costs. Others lump them into the origination fee. Total the fees up and compare them. Don’t assume a loan with 1 origination point is worse than the lender who itemizes. What if those itemized fees are lower than the point? You won’t know unless you total the fees.
Look at the interest rate as well, but don’t make it your only factor. Look at the big picture. Compare the APRs. This is the cost of the loan over the entire term. Remember, this is not a short-term investment. You may be paying it for the next 20 to 30 years. The less it costs, the better your finances in the long run.
Don’t overlook the benefit of using your local lender, but don’t restrict yourself. See what is available to you out there. You should definitely do this if one lender decides to throw an overlay on you and require an appraisal. Some may even require your credit score. If you don’t want to deal with either of these issues, shop around. Every lender has different requirements. They all must abide by the VA’s rules, but beyond that, they have free rein. Comparing costs, restrictions, and rates will give you the best deal available to you for the VA Streamline loan.