Veteran Affairs (VA) Streamline Mortgage

Veteran Affairs (VA) provides special benefits to veterans who want to refinance an existing loan. There are programs available for all veterans, regardless of whether the existing loan is a VA loan or a conventional loan. Vets who do not have a VA loan may have the option of refinancing their conventional loan into a VA loan. Vets who already have an existing VA loan may take advantage of lower interest rates by taking out a VA Streamline Refinance loan, sometimes known as an Interest Rate Reduction Refinancing loan (IRRRL).

The VA Streamline Refinance lets a homeowner lower his or her monthly payments, without having to pay any closing costs. There are several benefits to this program; for example, there is no maximum loan amount, no monthly mortgage insurance is required, and no appraisal is necessary.

In addition, no credit check or income check is required to qualify for the streamline refinance. There is, however, a small funding fee for interest reductions of 0.5 percent. In most cases, the streamline refinance is done to obtain a lower interest rate; however, a borrower may also wish to take advantage of the streamline refinance to move from an adjustable rate mortgage (ARM) to a fixed rate mortgage.

In the latter case, it is possible that the borrower may pay a slightly higher interest rate under the fixed rate mortgage than they may have been paying at the time under the adjustable mortgage, however, there are still advantages to doing so.

Any lender can make an IRRRL, and veterans are encouraged to shop around, since there may be substantial differences in the terms available from various institutions. The IRRRL is a straight-out refinance, and not a cash-out loan; no cash may be taken from the loan proceeds.

The IRRRL can only be taken if the veteran has already used his or her eligibility for the VA loan on the property being refinanced; the IRRRL merely reuses the original entitlement. The IRRRL cannot be greater than the outstanding balance on the existing loan, plus any allowable fees and closing costs, up to two discount points, and up to $6,000 in energy efficiency improvements.