Update () : This VA Streamline Refinance information is accurate as of today. VA guidelines have changed so if you’re getting VA Streamline Refinance information somewhere else on the internet, make sure it’s current and accurate.
What is a VA Streamline Refinance/VA Loan?
VA loans are a special loan program designed specifically for veterans, issued by approved lenders and guaranteed by the federal government. The VA Streamline Refinance is the most common loan type within the VA loan umbrella, and is officially known as an Interest Rate Reduction Refinance Loan (IRRRL) by the government.
The VA loan’s definitive characteristic is that veterans with qualifying credit and income can purchase a home with no money down, which makes buying a home extremely attractive for those who have served in the military. In addition, VA loans also offer feature flexible requirements, no private mortgage insurance (PMI), and very competitive interest rates.
In order to qualify for a VA Loan, a veteran must have served 181 days during peacetime, 90 days during war time, or 6 years in the Reserves or National Guard. You may also qualify as the spouse of a service member who was killed in the line of duty. Generally speaking, almost all active duty and/or honorably discharged service members are eligible for a VA purchase or streamline refinance loan.
The VA Streamline Refinance (IRRRL) Loan
The Interest Rate Reduction Loan allows you to refinance your current mortgage interest rate to a lower rate than you are currently paying. The Streamline loan is extremely popular because of its ease of use: once you have already been approved for your initial VA purchase loan, it is relatively simple to lower your interest rate and experience considerable savings. In most cases, a loan officer or lender with expertise in VA loans should be able to complete the loan within a month’s time in most cases.
VA refinance closing costs can be rolled into the cost of the loan, allowing veterans to refinance with no out-of-pocket expenses. Sometimes it is also possible for the lender to take the brunt of the cost in exchange for a higher interest rate on your loan.
In order to qualify for a VA Streamline, you must meet the following requirements:
- Be current on your mortgage with no more than one 30-day late payment within the past year.
- Your new monthly payment for the IRRRL must also be lower than the previous loan’s monthly payment. (The only time this condition does not apply is if you refinance an ARM to a fixed rate mortgage.)
- You must not receive any cash from the IRRRL.
- You must certify that you previously occupied the property.
- You must have previously used your VA Loan eligibility on the property you intend to refinance. (You may see this referred to as a VA to VA refinance.)
The VA Cash-Out Refinance Loan
A secondary VA refinance loan type is the VA Cash-Out refinance loan. The Cash-Out refinance allows borrowers to refinance their conventional or VA loan into a lower rate while also taking cash from the home’s value.
Functionally, the VA Cash-Out refinance loan replaces your existing mortgage instead of functioning like a home equity loan, which it is often confused for. A qualified borrower can refinance up to 100 percent of their home’s value in some cases.
The Cash-Out refinance loan is a loan type available in any form – whether USDA, FHA, or conventional. Veterans generally choose to use the VA Cash-Out over other loan types because the period to pay off the loan is extended, and also, generally comes with a lower interest rate.
Just like the VA Streamline Refinance loan, the home must be used as a principal dwelling by the owner. There is no set period of time that you must have owned your home, however, you must have sufficient equity to qualify for the loan.
VA Streamline Refinance Frequently Asked Questions
Do I need my Certificate of Eligibility (COE) for a Streamline Refinance?
Since you used your Certificate of Eligibility to get your first VA loan, it isn’t needed to qualify for a streamline refinance of your existing VA mortgage.
Does the VA control national interest rates for VA loan types?
No, they do not. Although the VA offers an easy, straightforward process for veterans, the rates are set by the banks who buy and sell mortgages.
Do I have to use my current lender to refinance my VA loan?
No, you do not. In fact, it is encouraged that you shop around between various lenders, as each will offer various interest rates for you VA loan. All that matters is that the lender is VA-approved. Because so many lenders out there finance VA loans, it makes sense to shop around.
Do I have to go through the credit check and appraisal process again when refinancing?
There is no requirement from the VA for another credit check or appraisal process, because you have already been approved for a loan. However, many lenders (especially if you swap them), require a credit check and appraisal to guarantee that you are still financially stable enough to pay for your mortgage and also, that the house’s market value is still higher than their maximum loan amount.
Do I have to be eligible for a better interest rate to qualify for a Streamline Refinance?
Not if you meet certain conditions. If you are going from a fixed mortgage to another fixed mortgage, the VA requires that your IRRRL be of a lower interest rate, but if you are moving from an adjustable rate mortgage (ARM) to a fixed rate mortgage, the VA will allow you to refinance to a higher interest rate.
Do VA loans qualify for the HARP 2.0 program?
No, the HARP 2.0 program is not eligible for a VA loan. If you current mortgage is underwater, some lenders will be able to refinance your VA loan using the IRRRL. However, many lenders will not want to service your loan because they view it too risky to take on.
Can I use the VA for no money down purchase loan?
Yes. The VA loan allows for 100% financing with no downpayment. Get a 100% VA loan purchase quote today.