VA Streamline Refinance

The Veteran’s Association Interest Rate Reduction Refinance Loan (VA IRRRL) program, commonly referred to as a VA Streamline Refinance, has proven to be one of the most helpful programs for our Veterans when it comes to financial savings. It is simple, easy, and can save Veterans a ton of money on their monthly payment as well as their long-term interest paid on their mortgage.

The program itself is very simple, but in the age of the internet there are a lot of misconceptions about what it can and cannot do for a Veteran wanting a home refinance. It’s time to dispel the myths.

Pros and Cons of a VA Streamline Refinance Loan

Pros

Simplicity

The primary benefit of a VA Streamline Refinance is its simplicity. While most refinance loans require a wide array of documentation often referred to in the industry as Full Doc, the VA Streamline Refinance program requires just the bare minimum documentation needed to verify basic client information. When it comes to the VA guidelines on this program, there are really two core elements that need to be verified before closing this type of loan:

  • The Veteran applying for the loan is who they say they are. To verify a Veteran’s identity, a couple of items are usually required:
    • A driver’s license (or other acceptable documentation such as Military ID or Passport) for basic identity verification.
    • Certificate of Eligibility (COE) is ordered to confirm the Veteran’s status. The COE will confirm the Veteran’s branch of service, remaining Entitlement, and if there are any service-connected disability benefits for the specified Veteran.

  • The Veteran is receiving a verifiable benefit from refinancing their home (lower payment, shorter term, lower interest rate etc.) Aside from issues with the title such as additional liens or judgments, these are really the two core elements that the VA needs.

With these two major checkpoints completed, you’re well on your way to a VA Streamline Refinance. After providing identification along with a copy of a recent mortgage statement (to verify account number and current loan information), Forthright Funding provides the remaining documentation needed for completion with the full application package. This package is typically provided online, making it easy for you to review and sign electronically instead of dealing with a ton of messy paperwork.

Funding Fee Exemption

With this information, Forthright Funding and the VA are able to confirm that you, as the borrower, are in fact the Veteran on record. The information will also confirm whether you are subject to pay a Funding Fee to obtain a VA loan. If you have a disability deemed 10 percent or more and it is confirmed on the COE, you are exempt from paying the VA Funding Fee.

Net Tangible Benefit

One of the greatest rules the VA has put in place for this program is the Net Tangible Benefit requirement. With this rule in place, you are protected from completing a refinance that lacks a solid benefit such as incurring too much closing cost, not enough savings, or over inflating the balance on the home. What this ultimately means is that if the VA Streamline Refinance is approved by Forthright Funding, the terms of the loan are beneficial for you.

Cons

No Equity Draw

Obviously, the VA Streamline Refinance program is a simple and easy way for our Veterans to save money but it does come with some limitations. Since a VA Streamline Refinance program does not require an appraisal or income documentation, the borrower is not able to take any additional cash out of the home. A Veteran may receive a small amount of incidental cash at closing (typically less than $400), but will not be able to draw from the equity in the property.

Limitations of Use

With this guideline in place, there are limitations on when the VA IRRRL program can be used. If you already have a great interest rate that cannot be improved upon, the VA IRRRL program becomes somewhat unusable.

VA Cash Out Refinance Alternative

In a market such as this one where home values are increasing, there are an increasing number of Veterans looking to draw equity from the home using a VA Cash Out Refinance. In this program, a Veteran can draw cash from the home up to 100 percent of the value of the property, allowing them to use that cash to pay off higher interest debts, pay for college, or invest in other areas among other endless possibilities.

It is important to be knowledgeable about the differences between a VA Cash Out Refinance and a VA Streamline Refinance program because they serve two very different purposes. Our highly experienced mortgage loan officers can assist in evaluating which option may best fit a Veteran’s needs. The right tool for the right job is a lesson we all learn throughout our lifetime. At Forthright Funding, we give you our promise that we will guide you to an informed decision, ensuring you the right loan at the right time.

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At Forthright, we will always treat you like a neighbor and not like a number. So, if you're ready to put down some roots or transplant the ones you have, please feel free to give us a call at
(855) 351-9522.

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7047 E Greenway Pkwy
Suite 300
Scottsdale, AZ 85254

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