Veterans look to the VA streamline refinance loan to help them lower their monthly payment. Because of the VA guarantee, many lenders can provide the low interest rates you may be looking to get. Typically, you’ll find that VA loan interest rates are lower than the rates on conventional loans.
Determine your eligibility and get started.
Contrary to popular belief, the VA does not set the interest rates. Your lender uses the market interest rates and adjusts them according to your qualifying factors. For the VA IRRRL, the main deciding factor is your mortgage payment history, but some lenders may also base it on your credit score, debt ratio, or your loan’s LTV.
Even though lenders don’t pull your credit report for the VA streamline loan, they can use your credit score from your original VA loan. You may also find a few lenders that pull your credit even though the VA doesn’t require it just to make sure you are still financially responsible.
Consider More Than the InterestRate
While the interest rate you pay to borrow the money on your VA loan is important, it’s not the only factor. You’ll pay fees to borrow that money that goesbeyond the interest rate. If you want to truly compare loans, you are better off comparing the APR or annual percentage rate.
This rate reflects the total cost of borrowing the money including the interest rate and closing fees. Don’t be alarmed when the APR is higher than the interest rate; it always will be as long as you pay closing costs. If you don’t pay closing costs, then the interest rate and APR would be the same.
Comparing the APR gives you a better idea of how much the loan will cost over its lifetime and which loan offers the least expensive option in the long run.
Choosing the Interest Rate
Before you can close on your VA streamlinerefinance, you will have to lock in the interest rate. This can be the hardest decision in the entire process. Once you lock in the rate, that is your rate no matter what happens in the market. If rates drop, you keep your rate, which might be bad news. But, if rates increase, you keep the lower rate, which is good news.
Find out if you are eligible for a VA loan.
You can work with your lender to determine the best time to lock in your rate. With the VA IRRRL, there is less pressure to lock the rate in until you are ready. You are refinancing to lower your interest rate, not to meet a contract deadline, so you have more leeway as you wait for the perfect rate.
Consider the Benefit
Keep in mind, when you look for the right VA streamline refinance interest rates, you have to have a net tangible benefit in order to qualify for the program. The idea behind the refinance is that you save money whether due to a lower rate or you shorten the term.
If you refinance from a fixed rate into another fixed rate of the same term, you’ll need that lower rate to qualify. Shop around with different lenders to find the lender with the most attractive rate. Once you find that rate, lock it in and reap the savings of refinancing your VA loan.
Do you automatically get a lower rate when you refinance with the VA IRRRL?
No, just like any other loan, you are subject to the market interest rates. If you are lucky enough to apply for a refinance when rates are low, you can take advantage of the savings. If rates aren’t lower than your current rate, though, it won’t make sense to refinance.
Does your credit score affect your interest rate?
This will depend on the lender you use. Some lenders do pull your credit and use it as an indicator for your interest rate. Other lenders don’t pull your credit and base your rate on your mortgage payment history.
Does it always pay to refinance into a lower rate?
Make sure you look at all aspects of the new loan. Just because you can lower your rate a little bit, it doesn’t mean you automatically benefit. If the savings are slight and you won’t stay in the home for the entire term, it might not make sense to refinance.
How do you know when a rate is low enough?
Figure out your break-even point to determine if a rate provides you with enoughsavings. The break-even point is when you pay off the closing costs and start realizing the interest rate savings. Take your total closing costs and divide them by the monthly savings with the lower rate – that’s how many months it will take to pay off the closing costs and reap the benefits.
Do all lenders offer the same interest rates?
No, you can find different rates from every lender you apply with for a VA loan. Some lenders may offer similar rates, especially if you have good qualifying factors. It always pays to shop around though.
Click to begin the VA loan refinance process.