The VA streamline loan makes it easy for veterans to refinance their current VA loan. Without verifying your credit score, income, or your home’s value, you can secure a lower interest rate or a better term for your VA loan. How do you get the best VA streamline refinance rates, though?
It’s not as hard as you think. We outline the simple steps below.
Maximize Your Qualifying Factors
It all starts with your qualifying factors. There isn’t a lot to worry about when it comes to the IRRRL, though, which is good news.
The most important factor regarding your VA IRRRL eligibility is your mortgage payment history. This is one of the only factors the VA relies on and requires lenders to verify. You must have timely mortgage payments for the last 12 months. The VA does allow an exception with one allowed 30-day late payment in that time. It cannot be within the last 3 months, though. But, if you are trying to get the lowest interest rate, having a clean mortgage payment history will give you the best shot.
The VA doesn’t require lenders to pull your credit, but many lenders still will. It’s a good idea to maximize your credit score before applying. Take the time to pull your credit from here. This way you can get an idea of what your credit history looks like. Do you have late payments? Are you overextended on any of your credit cards? Take care of these things before you apply for the VA IRRRL.
You should also try to get your debt ratio under control. Again, the VA doesn’t require lenders to calculate a debt ratio or to even verify income, but some might. Pay off as much debt as you can or at least lower the balance on your credit cards so that your DTI is as low as possible.
Finally, have a really good reason for the refinance. This is a major factor in your approval for the VA loan. The VA requires lenders to make sure there is a ‘net tangible benefit.’ This means that you benefit from the refinance in some way, such as a lower payment or a more stable term. This doesn’t mean if you can lower your payment only $50 a lender won’t approve you, but your chances are better with larger benefits.
Once you make your loan application as attractive as possible and prepared for the most intensive evaluation, it’s time to shop around.
You are not restricted to your current VA lender for the streamline loan. You are able to refinance with any lender that you choose as long as they are VA approved. Shopping around is the best way to secure the best rates. We recommend applying with 3-5 different lenders to see what rates are available to you. Each lender must send you a Loan Estimate within 3 business days of applying for the loan. You can then use these documents to compare the terms.
Make sure when you compare the offers that you compare ‘apples to apples.’ In other words, don’t compare a 30-year fixed rate loan to a 5/1 ARM. Make sure each loan has the same terms before you compare the VA streamline refinance rates. Of course, if you want to know the different options available to you, ask the lender for multiple quotes, just be careful when comparing your options.
One Final Factor
The final factor is a tricky one. Technically, the VA loan is for owner-occupied properties. But the VA IRRRL program doesn’t have a requirement regarding owner occupancy. You can use the program even if you won’t live in the home. However, if you can prove to the lender that this home will remain an owner-occupied property, it will increase your chances of securing a lower interest rate.
Lenders like to lend money for owner-occupied properties much more than for investment properties. The likelihood of default is much lower on owner-occupied properties, which means less risk for the lender. With less risk, lenders can often charge lower interest rates, saving you the most money in the long run.
Securing the best VA streamline refinance rates means putting a lot of the pieces of the puzzle together. Try to have the best qualifying factors and definitely shop around. You can find VA lenders near you, as well as online, where the sky is the limit when it comes to shopping around for the best interest rate.