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We are often asked what the difference between a VA and FHA streamline loans are. Because of such an abundance of interest in these types of loans and to help our readers better understand what a streamline loan is and what separates the VA and FHA types, we’ve created this guide. So without further ado, let’s jump right into the difference between VA and FHA streamline loans.
What Does it Mean When They Use the Term Streamline?
The very definition of streamline means to “present very little resistance, increasing speed and ease of movement,” and that is exactly what they mean in reference to home mortgage loans. When you first begin to apply for a loan to purchase a home, it may seem as though there are hundreds of hoops to jump through. With credit checks, appraisals and income verification being only a few things needed to qualify for a home loan, it can seem tedious when you begin looking to refinance. That is where a streamlined loan comes in. Only available for refinancing, streamlined loans help homeowners refinance with the smallest amount of resistance possible through speedy and limited paperwork and home check-ups. However, there are two different types of streamline refinance loans and each has specific qualifications as well as benefits to the home owner.
What is a FHA Streamline Refinance?
An FHA streamline loan is a refinancing option only for homeowners with an FHA loan. This type of refinancing process was created to allow homeowners the ability to have lower monthly mortgage payments as well as lock in lower interest rates if applicable. Through this type of streamline refinance, there is no need for a home appraisal and less paperwork is needed, meaning the time and money spent on traditional refinancing loans is streamlined for the convenience of both the lender and the homeowner.
What is a VA Streamline Refinance?
This type of loan is also commonly called an Interest Rate Reduction Refinance Loan or an IRRRL. It was created to allow United States military veterans the ability to secure the best interest rate available during a refinance. There is no home appraisal for a VA streamline loan nor is there a need for income verification. Because there is no need for these paper and time consuming reviews, the refinancing loan can run quickly and smoothly for both the homeowner veteran and the lender.
So What are the Real Difference Between These Two Types of Streamline Loans?
Each of these loan types is unique in several ways. First and foremost, the amount of paperwork and appraisals required for FHA streamline loan is much more extensive than that of the VA. However, the biggest difference lies in the qualification requirements of each loan.
Qualifications For an FHA Streamline Loan
There are several qualifications for this type of streamline loan. You can see a list below.
- Homeowners must currently be paying into a FHA mortgage loan and all payments must be current as well as were paid on time.
- Homeowners wishing to refinance must use an FHA approved lender for the FHA streamline refinancing process.
- The home and property to be refinanced must be owned by the homeowner and have been a principal residence for no less than 6 month leading to the streamline loan.
- The Streamline Refinance can only be used to lock in lower interest rates and lower mortgage payments. There are no Cash-Out options.
- Because there are no cash-out options with this loan, an FHA streamline loan cannot surpass the current FHA home loan.
- All loan closing costs will need to be paid beforehand.
Qualifications For an VA Streamline Loan
The largest and most prominent qualification for a VA streamline loan is that you must be a veteran of the United States Military or be an active service member who has already has a VA Home Loan. You may also be the spouse of a deceased service member (there being restrictions to such qualifications) who has already had a VA Home Loan. If you’ve received a VA home loan, it means that the majority of paperwork necessary for a refinance has already been filled out and the process can be streamlined.
How Does a FHA Streamline Loan Benefit Me?
An FHA Streamline loan works to benefit the homeowner in two corresponding ways. Foremost, it helps secure a lower monthly mortgage payment, meaning more money in pocket of other expenses. It does this by securing a lower interest rate, which can look good on a credit report as well as offer the lower monthly payments. To have this process streamlined means less stress on the homeowner and less time and paperwork, resulting in faster home refinancing.
How Does VA Streamlined Refinance Benefit Me?
This type of refinance offers several benefits to homeowners. Much like the FHA streamline loan, veteran homeowners can use a VA Streamline loan to secure lower interest rates as well as lower monthly mortgage payments. Unlike the FHA refinance terms though, there are no out of pocket expenses for homeowners meaning that closing costs are covered within the refinance. This type of streamline refinance loan can take a month or less to finish, which is truly a “streamlined” process.
VA & FHA Streamline Loans
We hope this guide has helped you understand the difference between VA & FHA Streamline Loans and if you have further questions, comments or would like to begin your streamlined process, we’d be happy help.