A VA Streamline Refinance is also known as an Interest Rate Reduction Refinance Loan, or IRRRL, because it is designed to help homeowners lower their mortgage rate quickly and easily. This special refinance type is available to homeowners who currently have a VA home loan.
The term “streamline” describes this loan product well. It requires much less documentation than a standard refinance. It’s the perfect way for current and former US military veterans to save money on their monthly mortgage payment without a lot of time and paperwork. A short list of VA streamline advantages are as follows.
As far as refinance programs, there is really no other loan product that is quite as easy as this one.
When current mortgage interest rates are low, it’s often a good idea to refinance. A refinance is simply a new loan that pays off the existing loan. The new loan has a lower rate or otherwise improves the homeowner’s situation.
The Veteran’s Administration developed this refinance program in 1980 to help our nation’s veterans get a lower mortgage payment with reduced hassle, time, and expense.
A VA streamline refinance allows the borrower to:
Mortgage rates are incredibly low right now. What’s even better, VA loan rates are much lower than even “standard” rates published by Fannie Mae and Freddie Mac. According to Ellie Mae’s January 2020 Origination Report, VA rates averaged 0.39% lower than conventional Fannie/Freddie rates in january 2020.
That means VA loan holders have access to very low mortgage payments compared to those without a VA loan. Why are rates so low for VA? These loans are heavily backed by the federal government. Lenders view these loans as low risk, and pass the savings on to the borrower.
I have a 5/1 ARM loan, can I use the VA streamline loan program? Yes. A 5/1 loan is a hybrid loan and is considered an adjustable rate mortgage. Other hybrids include 3/1, 7/1 or even 10/1 where the interest rate is fixed for an initial period. Even though the payment is fixed for a time, the rate will eventually adjust. A VA streamline is a great way to refinance into a fixed rate loan.
What credit score do I need? Each lender sets their own minimum credit score for this program. Typically, that score is 640, but a few lenders allow a 620 or even lower. Click here to find a lender with a minimum score that fits your needs.
My property is a rental. Can it qualify? As long as you can prove the home was once your primary residence, the property should be eligible.
Will my lender need a new title report? Yes, the new loan will need a new title insurance policy. The title report will provide evidence to the lender that there are no outstanding judgments or liens that will affect the new loan.
Can the lender use my old certificate of eligibility (COE)? Yes, in fact, you don’t need a COE at all. Your current VA loan proves that you are eligible.
Do I have to use the same VA lender I used with my original VA loan? No, you can use any lender that is authorized to underwriter and approve VA loans.
Can I skip two payments with a VA streamline loan? It may seem like it but in reality, no payments are missed when using a VA streamline. At your closing, the old VA loan will be paid off entirely which includes accruing interest. In addition, some interest will be prepaid on the new loan. If both interest payments were included in your new loan, the payments were made, just not out of your pocket.
My lender wants an appraisal, paystubs, bank statements and other things that are not required. What’s going on? Even though the VA does not require these items, a VA lender may impose its own “overlays,” meaning additional rules.
If a particular lender overlay is keeping you from using the VA streamline refinance program, click here to find a lender who has different rules.