If you are a veteran who qualified for a VA home loan when you first purchased your house, you may be able to get special rates and terms that are not available to civilians when you want to refinance your home. Special programs, such as the Interest Rate Reduction Loan (IRRL), or VA Streamline Refinance, allow eligible veterans to obtain the lowest fixed interest rates available, with little or no cost out of pocket.
This program for American veterans is considered one of the most attractive loan programs available for refinancing, for several reasons.
There is no Out of Pocket Closing Costs:
There are two options for avoiding out-of-pocket costs with this type of refinance program, and you can ask your lender which one is right for you. The first option is to accept a slightly higher interest rate, and let the lender pick up the closing costs. The second option is to get the lower interest rate, which is generally the lowest rate available for US veterans. If you choose this option, the closing costs will be rolled into the balance of the loan. You will eventually pay these costs back, but they will continue to accumulate interest over the life of the loan. This may be cost-effective in comparison to the first option, depending on how much you are borrowing for your refinance home loan. Talk to your lender and see which option works for you.
No Credit Check:
It is almost unheard-of for a lender to give you a mortgage with no credit check, but the VA streamline refinance is a rare exception to that rule. If the borrower has qualified for a VA backed loan in the past, and has remained current in their mortgage payments, the borrower will qualify for the mortgage with no credit check.
The rational for this is that the VA is already underwriting the original loan, which the borrower qualified for in the past. It is in the best interest of the lender, as well as the borrower, to do everything they can to make it easier for the borrower to meet their obligations.
Lowest Interest Rates:
Traditionally, the VA home loan programs have had the lowest fixed interest rate in the mortgage industry. If you are able to qualify for this program, or if you already have an ARM loan from the Veterans Administration, this may be the best mortgage choice for you.