(UPDATED: January 2018)
When the time comes to truly weigh the pros and cons of the VA streamline program, invariably the topic of closing costs comes up. What are the closing costs for the VA streamline? Are there items that cannot be charged to a VA streamline? Should you expect closing costs to be the same across the board for every lender or different for each lender?
These are just a few of the questions that many people ask.
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VA Streamline Closing Costs
The VA funding fee and certain closing costs can also be included in the loan amount financed by the VA streamline lender. The usual closing costs like discount points, title insurance, appraisal fees and funding fees are allowable under the IRRRL closing fee guidelines.
The VA streamline guidelines stipulate that no more than two discount points be included in the new loan amount. However, the borrower may choose to buy down their interest rate by paying more discount points in cash.
Since the streamline underwriting does not need an appraisal or a credit report, any related expenses that are incurred by the lender towards satisfying their own internal lending standards are chargeable to the borrower and can be financed into the loan amount.
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The inclusion of any of closing costs and fees into the mortgage loan can result in a higher monthly payment even if the interest rate on the overall loan is actually lower than before. Instead of increasing the loan amount, the interest rate can be increased to cover the closing costs, provided the interest rate and payment reduction guidelines are met.
If the prior VA loan is 30 days or more past due, the late payments and other reasonable legal charges may also be included in the new IRRRL refinance loan. The lender is required to submit such delinquent loans for a prior approval from VA.
VA Streamline Funding Fee
Any loan with a VA home loan guaranty is required to pay a VA funding fee. The funding fee collected at the closing allows VA to reduce the burden of the home loan guaranty program on taxpayers. The fee is quite reasonable as there is no PMI charged on VA loans, even for those making zero down payments.
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The actual amount charged as a VA funding fee depends on the loan type, the veteran’s or eligible person’s military category, the down payment amount and the number of times the entitlement has been used in the past.
The funding fee is basically a percentage of the actual loan amount. It can either be paid in cash or be financed into the loan amount.
For both veterans and Reservists/National Guards, the total VA funding fee for a streamline IRRRL is just 0.50%. So, for every $100,000 loan amount, $500 is charged as funding fee at the closing.
VA Streamline Closing Costs: Get The Best Deal
Each VA approved lender will have their own closing costs and closing cost structures. You can safely expect that each lender will provide you a written estimate of their rate and fees – and expect that each lender will be different when it comes to rate and fees. Sure, they may (or may not!) be in the same ballpark – but they will most likely be different.
There is one simple thing you can do to make sure you are getting the best deal on your VA streamline closing costs – shop multiple VA approved lenders and get multiple written rate quotes. By getting multiple rate quotes and putting the quotes side by side you can easily see who has the best deal for you.
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