The VA Streamline Loan makes it possible for you to refinance by only verifying your mortgage payment history. The lender will also check to make sure there is a benefit for you to refinance. Typically, this means a lower mortgage payment, but it’s not the only benefit. The VA allows you to use the program if you refinance out of an ARM or if you shorten your loan’s term too.
Click to begin the VA loan refinance process.
Something you have to think about though, is the closing costs. You’ll have to pay them when you refinance. This will play a role in your loan’s savings. Even if you save a little money each month, it could cost you several thousand dollars up front to close on the loan. This eats away at the total savings of the new loan.
What if you don’t have the money to pay upfront?
Luckily, you can roll the closing costs into the loan. The other good news is that the VA does limit what you can pay for closing costs, but they can still total as much as a few thousand dollars depending on your loan amount.
Rolling the Closing Costs Into the Loan
The VA allows you to roll any of the following costs into your VA streamline loan:
- VA funding fee, which is 0.5% of your loan amount
- 2 discount points or 2% of your loan amount
- 1 origination point or 1% of your loan amount
- Any itemized fees that the VA allows (credit report fee, underwriting fee, appraisal fee)
The lender cannot ‘double dip’ with yourclosing costs, though. In other words, they can’t charge the 1% flat fee (origination fee) and itemize closing fees. If the lender chooses to charge the flat fee, they cannot charge any of the following fees:
- Closing fee
- Notary fee
- Document fee
- Processing or application fees
- Rate lock fees
- Tax service fees
Click to See the Latest VA Refinance Rates.
Should You Roll the Costs Into Your Loan?
The bigger question you should ask yourself is if you should roll the costs into your loan or is it better to pay them yourself? This really depends on your situation.
Do you plan to stay in the home for the long-term? If so, paying the closing costs upfront may make the most sense. You’ll pay less interest over the life of the loan. If you wrap the costs into your loan, you pay interest on that amount for the next 15 to 30 years. The few thousand dollar closing costs could suddenly become much more expensive by the end of the term.
If you don’t plan to stay in the home for the long-term though, you may be better off wrapping the costs into your loan. Even though you will pay interest on the fees, you won’t pay it for long. This is better than spending a few thousand dollars on a loan that you aren’t going to keep for very long.
The ability to roll the closing costs into your loan isn’t dependent on your LTV, which is good news. Even if you borrow 100% of the home’s original value, you can still wrap the costs into the loan. Only you know what you can afford and which option makes the most sense. Make sure you receive quotes for both paying the fees yourself and wrapping them into the loan so you can determine which option is right for you.
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