Sunday, 18 November 2018
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This Old House - Do-it-Yourself

The VA Streamline

Written by Posted On Tuesday, 11 September 2018 12:54

VA loans, for those eligible, are the ideal option when coming to the closing table with as little as possible is a primary goal. VA loans don’t require a down payment whatsoever and one of the few zero-down options in today’s mortgage marketplace. The VA loan program also carries with it an inherent guarantee to the lender should the loan go into default (which is rare for a VA loan.) The guarantee is 25% of the loss to the lender. This guarantee is financed by what is referred to as the Funding Fee and is rolled into the final loan amount. In addition, there is no additional monthly mortgage insurance payment that can be found on other low down payment programs.

 

But beyond all of these advantages, there is another that comes into play when someone decides to refinance an existing VA loan. Maybe rates have fallen or home owners want to switch from a hybrid to a fixed. With a refinance, either or both can be accomplished. When replacing an existing VA loan with a new one, borrowers can take advantage of the Interest Rate Reduction Refinance Loan, or IRRRL. However, most in the industry refer to this process as a VA “streamline” primarily due to the lack of documentation needed to approve and close the refinance request.

With a standard VA mortgage, borrowers are asked to provide evidence of employment and income for the past two years with either pay check stubs and W2s or income tax returns for those that are self-employed. While there is no need for a down payment there will be closing costs involved so lenders need to verify sufficient funds to close which is accomplished by providing copies of bank statements. To establish a final value, a new appraisal will be ordered. Yet with a VA streamline you can ignore all of this.

As long as the existing loan is a VA mortgage and replaced by a new VA loan the streamline is an option. The lender will verify there are no payments made within the past six months more than 30 days past the due date and no more than one such payment over the last twelve. There needs to be evidence the new rate is lower than the old one, the borrowers are switching to a shorter term or they are refinancing out of an adjustable rate loan or hybrid and into the stability of a fixed. VA guidelines simply think that if someone has made their payments on time for the last year at the old, higher rate then it makes sense they can continue to do so at a lower rate.

The VA loan comes with a lot of advantages that other loan programs simply do not have, and making available the streamline option is yet another one.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending.

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country.

Reed was the former Technology Chair for the Texas Mortgage Bankers Association, Board Member and President of the Austin Mortgage Bankers Association. He is married and a father of three in Austin.

www.cdreed.com

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