Getting a VA streamline loan has become more complicated since the housing crisis. More lenders are paying more attention to the borrower’s ability to repay the loan. This means the process may take longer than expected in some cases unless the borrower makes a point of understanding the basics and ensuring the right process is followed.
This not only help shorten the time the process takes, but also helps the borrower to have more information on the rates and make the best choice. The following are some of the things that may help you make better decisions.
Fixed and Adjustable Rates
The first thing you need to note about VA streamline refinance, is that the mortgage rates for VA loans may either be Fixed Rates mortgage, Adjustable Rates Mortgage (ARM) or a hybrid of the two. When seeking refinancing for fixed rates, monthly payments made must be lower than the rates for the old loan. However, if you are using an adjustable rate mortgage, then the rates could be higher. When you reduce the payment period, the rates will obviously go up. The lender is required to certify that the borrower can handle the increase in rates. This happens when the rates go up by 20%.
Borrowers can finance their closing costs as long as they are within the 20% limit. The total maximum VA loan is the sum of the current balance, the funding fee, allowable charges, two possible discount points and the cost of any energy improvements done on the house. The rate can only be reviewed for the current loan and not any other loan. Usually the funding fee will be about 0.5% of the loan.
Assumed loans can be classified into two, those that were taken before March 1st 1988 and those taken after this date. It is much easier to assume liability for loans that were taken before that date. All the borrower has to do is to contact the relevant government department for information about the loan so that the new owner can then sign documents and send them to the department of veteran affairs before the liabilities for the VA loans can be transferred.
If the assumed loan was taken after March 1st 1988, then transferring the VA loan liabilities becomes a little tricky. The original borrower must inform the Veterans Authority of his intentions and wait for approval before it can be assumed. Certain processes and standards must be met after which a processing fee will be paid.
Things you may not know about getting a VA loan refinance