Tips & Special Topics
VA Streamline Refinance Still Streamlined
Added April 5, 2010 | Updated April 5, 2010
Recently, Federal Housing Administration (FHA) tightened the requirements for its Streamline refinance program, which in the past has allowed FHA loan holders to refinance to reduce their interest rate with little hassle. It will now be more difficult to qualify for an FHA Streamline refinance. The U.S. Department of Veterans Affairs has a similar refinance program for VA mortgage holders, also called Streamline, and it hasn’t followed suit in tightening its qualifying criteria. Many homeowners with existing VA loans seeking to refinance without hurdles and hefty fees continue to receive quick and easy processing with a VA Streamline, otherwise known as Interest Rate Reduction Refinance Loan (IRRRL).
The FHA released its "Revised Streamline Refinance Transactions" outlining its changes on September 18, 2009. Under the new rules, FHA borrowers can expect stricter rules under the Streamline program such as:
• Appraisal is now required in order to add "roll in" closing costs to the refinance
• Maximum loan to value ratio can’t exceed 97.75%, and in some circumstances lower ratio limits apply
• Income must now be verified
• Employment must now be certified
• Assets must now be verified if required
• Higher credit scores are now required
• Access to cash required for closing must be verified in advance
• No reduction in term is allowed
• The new total mortgage payment must be reduced by at least 5 percent
Also, as of April 5, 2010, the Upfront Mortgage Insurance Premium (UFMIP) on FHA Streamline Refinance loans is increased to 2.25%
The features of the VA-to-VA Streamline refinance, as outlined by the VA, allow for:
• No appraisal in most cases
• No maximum loan-to-value ratio
• No income verification
• No asset verifications
• Quick closings
The U.S. Department of Veterans Affairs preserves its Streamline rules in keeping with the original intention of the VA Home Loan Guaranty Program – to assist the nation’s veterans as homeowners. Because the VA already guarantees a portion of each VA mortgage, fully re-qualifying the same borrower and property in order to complete a VA-to-VA Streamline Refinance isn’t necessary. By helping VA loan homeowners lower their monthly mortgage payment, the VA is also lowering its overall risk on each loan refinanced under its Streamline program.
So, when FHA lenders will be required to deny many streamline refinance requests due to changes in employment, income, asset, and appraisal requirements, VA lenders can continue to help qualified veterans reduce their interest rates based mostly on their mortgage payment history. The guidelines for VA loans are from the Department of Veterans Affairs and VA-approved lender requirements may vary. For more information about VA-to-VA Streamline Refinance contact a VA Loan Professional.
