Can I refinance my Home if it’s Underwater?
Yes. The VA streamline does not require an appraisal, therefore no value is established for the property. The basis for the loan is the existing VA loan, not the current value of the property.
Do lenders impose additional rules for VA streamlines?
Yes. Often, lenders will impose “overlays,” which are additional guidelines on top of VA’s requirements. Each lender has the right to establish their own standards for lending on VA loans.
For instance, the VA does not require an appraisal or credit report. But almost all lenders require a credit report, and many require an appraisal for a VA streamline. If you are worried about the value of your home or the cost of the appraisal, find a lender who will complete the loan without an appraisal.
Do I need my COE for a streamline?
No. Your Certificate of Eligibility (COE) is only needed for VA home purchase loans, not for a streamline refinance. Since you already have a VA loan, most lenders will simply request a prior loan validation directly from VA’s website in lieu of a COE.
Can I add or remove anyone from the mortgage with a VA Streamline?
In some cases, parties can be added or removed. The general rule of thumb is that the veteran who was eligible for the original loan must remain on the loan. The exception is when a spouse and veteran are on the existing loan, and the veteran passes away. In this case, the spouse may be able to refinance with a VA streamline without the eligible veteran.
What if the VA streamline raises my payment?
The payment is allowed to rise as a result of the VA streamline in some cases. In the very rare case that the new payment goes up 20% or more because of these features, the lender may ask for full income documentation. Usually the payment does not rise that dramatically because of the below factors:
- ARM to Fixed Rate
Because fixed rate mortgage generally have higher interest rates than adjustable rate mortgages (ARMs), your payment may go up. But, often it is a good trade off to know that your payment won’t change over the life of the loan like it can with an ARM.
In some cases, your rate and payment may even go down if your ARM interest rate is higher than today’s low fixed rates.
- Shorter Term
The VA streamline allows you to refinance from a 30 year loan into a shorter term, such as a 15 year term. In this case, it’s OK for your payment to rise as long as your interest rate goes down. Since shorter term loans pay off faster, payments are bigger than loans with longer terms.
- Energy Efficient Improvements
As an added benefit, the streamline refinance program allows home owners to finance up to $6000 in energy efficient improvements for their home. These improvements will save home owners money over time and are a great option for those who are interested in upgrading and adding value to their home. Some examples of energy-efficient items are programmable thermostats, insulation, solar heating, and caulking/weather stripping.
In some cases, the veteran may receive cash at closing of a VA streamline for reimbursement of energy-efficient items.
What if I have a Second mortgage?
Second mortgages on VA loans are fairly rare, since VA loans do not require a down payment, and therefore not enough equity exists to obtain a second mortgage.
In the case that there is a second, the new VA loan from a streamline can’t pay it off. A VA cash out loan would be required. Any additional loans on the property need to be “subordinated,” or put underneath on title, behind the new VA loan.
Can I get cash at closing with a VA streamline?
No. VA streamlines are meant only to pay off the existing loan and closing costs. The only exception is when a veteran prepays for energy-efficient improvements and needs to be reimbursed for actual costs.
Should I apply for a VA streamline with my current lender?
Although your original lender or current mortgage servicer might be able to do your VA streamline, it is not required. Any VA-approved lender can do your streamline, and it’s best to check with a few lenders to compare interest rates and fees.
Is VA streamline the same as HARP 2.0?
No. HARP 2.0 is a refinance for loans owned by Fannie Mae or Freddie Mac. Fannie/Freddie do not own VA loans, so a HARP loan can’t refinance a VA loan.
Can I refinance my VA loan with a new conventional loan?
Yes, if you have enough equity and meet other qualification standards for conventional loans. If you have 20%+ equity in your home, it would be possible to open a new conventional mortgage without a funding fee or mortgage insurance, to refinance the current VA loan. This type of loan would require an appraisal and full income, asset, and credit underwriting.
What are the closing costs on a VA streamline?
Closing costs vary greatly from lender to lender. Borrowers should shop around to find the best interest rate and closing cost combination for them. There are certain closing costs the veteran can and cannot pay on a VA loan. Generally, rules for VA streamline closing costs are the same as for purchase closing costs, except that the veteran may not finance more than two discount points (2%) into the new loan. Discount points are points paid to reduce the interest rate. For a closing cost quote based on your specific situation, contact a licenced VA lender.
Can the lender pay my closing costs instead of including them into the new loan?
In some, cases, the lender can give you a higher interest rate and pay your closing costs, and sometimes even your funding fee. The closing costs aren’t added to the loan amount; the lender pays them for you by using the excess profit from the loan. Usually this works best when rates are very low, or if you currently have a high interest rate. In these cases, you lower your rate substantially, despite the rate hike given to you to pay for fees.
For instance, if market rates are 4.0%, your lender might give you a 4.25% rate and pay all your closing costs. You still end up with a great rate, and don’t add much principle to the loan balance. This isn’t always an option, though, and often closing costs need to be wrapped into the new loan or paid in cash.
Can I skip a payment by getting a VA streamline?
No payments can be skipped. Sometimes, depending on the closing date of the new loan, it appears that a payment has been missed because the previous or subsequent month’s interest was wrapped into the new loan. However, the VA does not condone this practice as a method to “skip” a payment. The VA lender should not coach the borrower to structure a refinance in this way.
How do I know if market rates are lower than my current rate?
The amount of money that you can save with a VA streamline refinance varies with the current VA interest rates that change based upon the normal market fluctuations. You should look at the current VA rates displayed on our site and match them against the rate you got when you initially got your VA loan. If the rate is lower than what you are currently paying, there’s a strong chance that you can save money with a VA streamline refinance loan.
Can I use a VA streamline to refinance another type of loan?
No. VA streamlines or for VA to VA refinances only. If you have a conventional, FHA, USDA, or other type of loan, you could possibly use a VA cash out refinance. You would need an appraisal, and income, asset, and credit documentation.