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VA Streamline Loans

This type of loan has several different names.

It may be called an IRRRL which stands for “Interest Rate Reduction Refinancing Loan,” its formal name.

It may also be called a “VA to VA Loan” or a “VA Streamline Loan.”

I will be calling this type of refinance loan a VA Streamline Loan in this article.

There are special rules for refinancing VA-type mortgage loans.

Be sure you understand exactly the type of loan that you want to apply for.

Make sure that you actually want a VA Streamline Loan.

A VA Cash Out Refinance Loan may be what you actually want.

What Is a VA Streamline Loan?

The VA’s Streamline Loan Program is a way for veterans with an existing VA-guaranteed Loan to refinance their existing mortgage loan to take advantage of a lower interest rate or to move from an ARM-type loan to a Fixed Rate Loan with no, or almost no, out-of-pocket financing costs.  Those costs are allowed to be rolled into the new loan.

Normally, the new loan must reduce the interest rate of the mortgage.  However, the interest rate may be increased when the veteran is changing the mortgage from an ARM to a Fixed Rate Mortgage.

What Can Be Refinanced As A VA Streamline Loan?

The rules associated with the VA Streamline Loan allow only one type of loan to be refinanced.  The only loan which can be refinanced under this program is an existing VA mortgage loan.  And, that loan must have been written under the veteran’s original eligibility.

How Much Can You Borrow?

The loan may not exceed the sum of the outstanding balance on the existing VA loan, plus allowable fees and closing costs, including funding fee and up to 2 discount points.  You may also add up to $6,000 of energy efficiency improvements into the loan.

NOTE:  Adding all of these items into your loan may result in a situation in which you owe more than the fair market value of the house, and will reduce the benefit of refinancing since your payment will not be lowered as much as it could be.  Also, you could have difficulty selling the house for enough to pay off your loan balance.

What Is The Occupancy Requirements For A VA Streamline Loan

The occupancy requirement for an VA Streamline Loan is different from other VA loans.  When you originally got your VA loan, you certified that you occupied or intended to occupy the home.

For a VA Streamline Loan, you need only certify that you previously occupied it.

Certificate Of Eligibility

Unlike your original VA loan, a certificate of eligibility is not required.  The lender may use the VA’s e-mail confirmation procedure for interest rate reduction refinance instead of a certificate of eligibility.

Costs, Appraisal and Credit Checks

The only cost that the Veterans Administration may require you to pay is a funding fee of one-half of one percent of the loan amount which may be paid in cash or included in the loan.

No appraisal or credit underwriting package is required by the Veterans Administration.  You should be aware, however, that lenders may require an appraisal and credit report anyway.  If they do that, you may be required to foot the cost of the appraisal and the credit report package.

This type of loan permits all of the closing costs to be rolled into the new loan.  And, the lender may increase the interest rate of the new loan so that it is economically feasible for them to do so.  However, except in the case of an ARM which is being converted to a fixed rate loan, the interest rate of the new loan must be below the interest rate of the loan that is being refinanced.

Also, they not need as much paperwork as a regular refi-loan application and so can be written and approved much faster than a normal refinance.

Who Can You Get A VA Streamline Loan From?

There are no rules or laws which require any lender to give you a VA Streamline Refinance Loan.  You can put your application for a VA Streamline Loan through the lender of your choice.  However, the lender that you got your original VA loan or the lender that you make payments to on your existing VA loan may be a good place to start.

There is a lot of competition in the market place some make sure you contact at least 3 or 4 lenders to identify and select the right one for you.  It may save you many thousands of dollars over the course of your loan.

And, there is a lot of “Flim-Flam.”

There Is A Lot Of Flim-Flam

Flim-Flam is an older word which means “trickery.”  It’s usually in the sense of a “con.”  You need to watch out for this type of thing.  While most mortgage lenders are “honest to a fault,” there are, unfortunately, some that will try to keep you from shopping around or to include unusually charges into your refinance loan.

If a lender suggests that you they are the only company that is authorized to make a VA Streamline Loan,  I strongly urge you to immediately remove the lender from consideration as a source of your loan.

Likewise if a lender says that the VA requires various closing costs to be charged and included in the loan, remember what I said earlier in this article: “The only cost that the Veterans Administration may require you to pay is a funding fee of one-half of one percent of the loan amount which may be paid in cash or included in the loan.”  Again, if that happens, I strongly urge you to immediately remove the lender from consideration as a source of your loan.

Also, there is a thing called “Predatory Lending Practices”  that you need to be aware of.  In predatory lending practices, a lender will give you a loan that you are not or are just barely qualified for expecting to you to eventually default on your mortgage.   <Click here> to read my article on predatory lending Practices.

Predatory loan practice and can be addressed in a court of law.  But, they are hard to prove.

A Final Thought

You actually have quite a bit of flexibility in this type of loan.  If you decide that it is what you want, you need to make sure that your VA Streamline Loan will do what it was designed to do, reduce your interest rate and hence your monthly payment.