Vets rescued by VA refi

One of the best -- and easiest -- streamline refinance programs is available to consumers who now have a loan guaranteed by the U.S. Department of Veterans Affairs.

The VA streamline, known as the Interest Rate Reduction Loan, has no "season" requirement, meaning that borrowers who refinanced recently still are eligible. In addition, the loans entail very little documentation and usually do not require an appraisal.

In order to qualify, borrowers must have a current VA loan. The interest rate varies on the loan type (some 30-year fixed-rate loans are now less than 5 percent) and the length of the loan cannot exceed 360 months. Payments are due monthly. No more than two points may be rolled into this loan plus the allowable closing costs. A funding fee of approximately 0.5 percent is typically collected before closing and can be financed into the loan. Funding fee exemption is possible upon proper verification of disability.

VA lenders will ascertain that borrowers meet basic program requirements including:

• The new monthly loan payment must be for less than the original loan.

• The interest rate must be for less than the original loan (unless refinancing an adjustable-rate mortgage).

• The term cannot exceed 360 months or no more than 10 years more than the original loan term (up to a max of 360 months).

VA loans are guaranteed by the Department of Veterans Affairs and can be used to purchase a single-family home, including a townhouse or condominium unit in a VA-approved project, to build a home, and purchase and improve a home. Loans are assumable under certain conditions and do not have a prepayment penalty.

The VA program began in 1944 when President Franklin D. Roosevelt signed the Servicemen's Readjustment Act into law. This bill, which eventually became known as the GI Bill, allowed veterans to purchase homes without making a down payment. The VA fixed-rate loan gives borrowers the option of financing their mortgage in 15-, 20-, 25- or 30-year terms. ...CONTINUED

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