The VA Streamline Refinance process is fairly straightforward and is among the easiest loans to qualify for when trying to refinance. As long as you currently have a VA loan and strictly want to reduce the interest rate on that loan, you can qualify for this program in a few easy steps. If it were simply up to the VA, you would not have re-verify anything and you would simply be able to lower your payment as long as your housing and other outstanding credit payments were on time for the last twelve months. But because most lenders have their own requirements on top of the VA’s, you will have to undergo a little more scrutiny. Following are some of the most common questions about the process.
Will I need a new appraisal?
This answer is twofold; some lenders say yes while others say no. So in the end, it depends on your lender and the value of the homes in your area. According to the VA, you can use the original appraised value of the home when you first got the VA loan. But, some lenders are not willing to take that risk, especially if they know the values in your area have greatly changed. They may want to see just how far underwater you are on the loan. If you are too far underwater, you run the risk of just walking away from the home, which hurts the lender in the end. If one lender requires an appraisal and you don’t want to pay for one, you can always shop around with other lenders to see who has a different requirement.
Does my payment have to go down?
Technically, yes, your payment must decrease, but in some cases it will not. The idea behind the VA Streamline Refinance program is to lower your payment to give you more disposable income every month. In some cases, however, this does not happen. This includes borrowers that refinance from an adjustable rate mortgage to a fixed rate or those that refinance into a shorter term, such as a 30-year term to a 20-year term. In these situations, the payment may go up and you can still get approved. This is because a fixed rate is less risky than an adjustable rate and a shorter term is less risky than a longer term. Of course, you will have to prove that your debt ratio does not increase too much or you will not be able to qualify for the higher payment.
Do I need to prove my Certificate of Eligibility?
No. Because you are refinancing from one VA loan to another, you are basically reusing your eligibility that was used to originally secure the loan. The lender that you use for the new loan, even if it is not the same lender that gave you the original VA loan, can validate your eligibility, making the process much quicker for you to refinance.
Can I take cash out?
No, you cannot take cash out of the equity of your home when you refinance using the VA Streamline Refinance. You can only take out the new loan for the amount of the outstanding principal on the loan, the new funding fee, and any closing fees that are allowed. In some circumstances, you can include the costs for energy efficient changes up to $6,000, but the cash is paid directly to the company making the changes – you do not receive any cash in your hand during this refinance process.
Does my credit score count?
This is another question with two answers. Technically, the VA does not require your credit to be pulled again for the refinance. Most lenders will pull it though because they need to see what you have been up to with your finances. If your credit score dropped dramatically, you might not be eligible for the loan because the lender will not want to take the risk. Generally, the minimum credit score allowed is 620, but every lender has their own requirements, so don’t be afraid to shop around. One thing that all lenders will look at that is not directly impacted by your credit score, however, is the number of late payments you have in the last 12 months. If you have more than one late payment, the VA says that you are ineligible for the refinance.
The VA Streamline Refinance process is simple and efficient to get through. It is a great way to save money every month and say with the affordable VA program. You are free to shop for any lender that is approved to provide VA loans, so make sure to shop around to get the best deal!