Guidelines, Eligibility and Fees for refinancing a VA Loan.
Who is Eligible For a VA Streamline Refinance Loan?
Any Veteran or active duty military personnel that currently have a VA mortgage.
What are the Basic Qualifications for a VA Streamline Refinance Loan?
- VA to VA loan - Must be refinancing an existing VA loan
- Bad credit OK - Minimum credit score (FICO) needed is 620.
- Collections OK - If you have any collections you can still qualify
- No Income verification OK - You do not need to prove employment
- No Appraisal OK - Your current property DOES NOT need not be appraised
What are the Disqualifications for a VA Streamline Refinance Loan?
- Judgments - Must be cleared before qualifying
- Liens against your property - Must be cleared before qualifying
- Late payments - You'll be disqualified if you missed more than ONE 30 day late payment on your mortgage in the last 12 months.
Occupancy Requirement:
For IRRRLs, the veteran or the spouse of an active service member must certify that he or she previously occupied the property as his or her home. This is different than the requirement for non-IRRRL VA loans that the veteran must intend to personally occupy the property as his or her home.
Maximum Loan Term:
The maximum loan term is the original term of the VA loan being refinanced plus 10 years, but not to exceed 30 years and 32 days.
Title and Lien Requirements:
- The VA IRRRL must replace the existing VA loan as the first lien on the same property.
- Any second lien-holder would have to agree to subordinate.
- The borrower cannot pay off liens other than the existing VA loan from IRRRL proceeds.
- The veteran (or surviving co-obligor spouse) must still own the property.
What are the Fees For a Streamline Refinance Loan?
There is a .5% funding fee for using the IRRRL program to refinance your home. This fee can be fully financed which means it's "rolled into the new loan amount".
This fee helps defer the cost of private mortgage insurance that would have been required had you taken out a conventional loan. Keep in mind, VA charges no monthly mortgage insurance premium, instead letting Vets pay a funding fee of .5%.
If you are currently receiving disability benefits from the VA you are exempt from the funding fee.
Additional VA Loan Refinance facts:
The principal and interest payment on an IRRRL must be less than the principal and interest payment on the loan being refinanced unless one of the following exceptions applies:
- the IRRRL is refinancing an ARM,
- term of the IRRRL is shorter than the term of the loan being refinanced, or
- energy efficiency improvements are included in the IRRRL.
When Can the Borrower Receive Cash at Closing?
An IRRRL cannot be used to take equity out of the property or pay off debts, other than the VA loan being refinanced. Loan proceeds may only be applied to paying off the existing VA loan and to the costs of obtaining or closing the IRRRL. Therefore, the general rule is that the borrower cannot receive cash proceeds from the loan. If necessary, the refinancing loan amount must be rounded down to avoid payments of cash to the veteran.
The one exception is reimbursement of the veteran for the cost of energy efficiency improvements up to $6,000 completed within the 90 days immediately preceding the date of loan closing.
