The Veteran’s Affair’s Streamline Refinance Program makes refinancing much easier for its eligible borrowers. Aside from its very few requirements, it helps veterans lower their monthly payments by cutting down their interest rate. This means significant savings every month for many modern American heroes and their families. But just because the program is a bit lenient does not mean you cannot get turned down on your application. There are ways by which a potential borrower or eligible veteran could sabotage his or her own refinancing application.
Beware of these errors and make sure you avoid them if you plan to refinance soon or in the future.
Paying your mortgage payments late
When you decide to refinance with the Streamline program, lenders will not require another credit report assessment. To make up for this lack of credit evaluation, they instead check your payment history for the last 12 months. If you’ve been delinquent or circumstances in the past caused you to delay your payments, this might pose a problem to your creditability.
Remember that you need to establish confidence with your lender, thus you cannot afford to have more than one 30-day late payment. If you have more than that, your application would most likely be turned down. However, that does not mean you cannot apply for the loan again. If you have too many delinquent payments, you can revamp your payment habits and make sure you do them on time for the next 12 months. After that, you can apply again with hope for a better outcome.
Not living in the home
You need to prove to your lender that you have occupied the property previously, otherwise, you are most likely going to be denied. If you moved out and used your house as investment, you will not be eligible for the program as well.
Cashing-out on your home’s equity
Tapping into your home’s equity is a bad idea if you’re eyeing a streamline refinance. The loan amount is limited to the outstanding principal balance of your mortgage, the closing costs allowed, and the funding fee. Anything beyond the allowable amount will make you ineligible for the program.
Increasing your payment
In some instances, shifting into another mortgage product can cause your monthly mortgage payments to increase. For example, you have an adjustable-rate mortgage and want to change it into the more stable fixed-rate mortgage but you are in are still in the initial phase of your ARM payments. It is possible that you will now have higher interest rate in your new loan. Another instance is transitioning into a shorter loan term. In which case, the same could happen.
Both are allowed, but only to a certain extent. You can only increase your payments up to 20 percent. Anymore beyond this amount will not be accepted into the program.
Having bad credit
Lenders are not required to assess your credit profile for you to be eligible for the program. However, they are not prohibited to do so either. Some lenders would go ahead and pull off your credit to determine your creditability. This is not a solid reason to get a loan denial, however but it’s better to be cautious and work on building good credit, just as when you apply for other mortgage loans.