Veterans with a current VA loan have the opportunity to refinance with a very streamlined program. You don’t need to prove your credit score, home value, or income. Lenders rely on your mortgage payment history to qualify you for the loan.
Determine your eligibility and get started.
You’ll have to abide by their maximum loan amount rules, though. This loan program isn’t meant used to help you take cash out of the home’s equity. It’s strictly to help you lower your payment, after all, the program is called the Interest Rate Reduction Refinance Loan. While there are a few exceptions to the rule, in general, you’ll need to lower your payment and/or rate to get approved.
Keep reading to see just how much you can borrow for your VA IRRRL.
The Outstanding Principal Balance
The bulk of your new loan amount will consist of your outstanding principal balance on your current VA loan. The lender will determine how much you owe as of the payoff date, which should include enough days to cover the per diem interest.
You cannot add anything to this amount that doesn’t have anything to do with the closing costs or VA funding fee. In other words, you can beef up the principal balance of your new loan in order to take cash out of your home’s equity. This loan is strictly a rate/term refinance. You cannot receive any money in hand at the closing.
Click to begin the VA loan refinance process.
The Closing Costs
The VA is strict when it comes to closing costs veterans can pay. This helps to keep the costs down for veterans as a part of their benefit. The main closing costs veterans pay that can be added to the VA streamline loan amount include:
- 1% origination fee – This should be all of the closing costs the lender charges. If the lender doesn’t charge the origination fee, they can itemize the closing costs, but they can’t exceed 1% of the loan amount.
- 2% discount fee – You can pay up to 2 points to buy your interest rate down on the loan. If the lender quotes you a higher interest rate than you anticipated, you can decide if you want to include 1 or 2 points in your loan amount to secure the lower rate.
- Prepaid interest – If you close in the beginning or middle of the month, you’ll need to cover the interest for the rest of the month. You can include this cost in your loan amount.
The Costs of Energy Efficiency Changes
The final cost you can include in your VA Streamline loan is up to $6,000 in energy efficiency changes. This only applies to certain borrowers, though. The VA lender must have ample proof that the energy efficiency changes will have an impact on your utility bills. If there isn’t a benefit for the changes, the VA won’t allow you to include the costs.
If you can include them, you may make up to $6,000 in changes. The exact changes must be approved by an auditor, as he/she will determine if the changes will lower your utility bills. This is very important because adding $6,000 could increase your mortgage payment, but if it’s offset by lower utility bills, it can be a wash.
Beyond these costs, you cannot add anything else to your VA streamline loan. The VA wants you to keep the loan amount as close to the original amount as possible. Since they rely on your mortgage payment history, they don’t want your payment increasing so much that it becomes much harder to afford.
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