What is the VA IRRRL program? The VA IRRRL also known as the VA streamline refinance loan is abbreviated as Interest Rate Reduction Refinance Loan. The VA IRRRL is used to refinance one mortgage into another, to reduce your current rate into a new lower rate, and in most cases a lower monthly mortgage payment. Also with the IRRRL program, you can move from an adjustable-rate loan to a fixed-rate loan. The IRRRL program offers current veteran homeowners an excellent opportunity to take advantage of low-interest rates with the backing of the VA. The IRRRL again is also known as the VA streamline is exactly that, a streamlined process to refinancing your current mortgage. The VA has made this an easy process for veterans to help them save money and get a lower interest rate.
How does the VA IRRRL Work?
Now we know the basics of what a VA IRRRL program but how does it work? In the VA loan program, there is a streamline refinance option called the VA IRRRL. As you can probably tell from the name, the VA’s streamline refinance option is intended for veteran borrowers who just want a lower interest rate on their mortgage. Getting a lower interest rate is good for two reasons: it saves you money over the life of the loan, and it saves you money every month because a smaller monthly payment will still be fully-amortizing.
VA Streamline Refinance Eligibility
To be eligible for a VA streamline refinance loan there are a few things to keep in mind. You must be a veteran that owns your home. You must have a VA loan. This is what helps with the VA streamline process. By having a previous VA loan the loan information is transferred over helping to reduce the paperwork significantly on the VA IRRRL. You can still convert your loan to a VA loan if you currently have an FHA or conventional loan however there might be more paperwork involved and a higher VA funding fee depending on your situation.
- Current mortgage must be a VA loan
- Must be a veteran homeowner
- No Fico Restrictions
- No need for an appraisal
- No lender fee
- No Mortgage Insurance
- No LTV restrictions
- No loan limits
IRRRL Program Pros and Cons
The Interest Rate Reduction Loan is an easy program. It is also know as the VA streamline. This VA refinance option is a benefit designed to help veteran homeowners reduce their interest rate in a quick and simplified manner by reducing the amount of paperwork. The VA IRRRL has helped many veterans save money while lowering their interest rate and in most cases decreasing their monthly mortgage payments. Let’s take a closer look at the IRRRL program pros and cons.
First lets start with the pros. There are more pros than cons when it comes to the VA IRRRL program. Remember the IRRRL was designed to help veterans save money and lower their interest rate with a fast streamlined application process. If you are a veteran home owner with a higher interest rate you might want to consider a VA IRRRL. If you have questions about your situation and would like to speak with a licensed VA lender call 855-956-4040.
IRRRL Program Pros
- Save money by lowering your interest rate
- In most cases no appraisal is needed
- Employment verification is usually not needed
- No dept to income check
- No minimum FICO score
- Change your loan terms
- Faster closing times, the streamline loan can usually be closed in under 30 days
- Option to defer two months of mortgage payments
- Usually keep your escrow refund
- No cash due at closing
IRRRL Program Cons
- Not enough net tangible benefit
- No cash back, however you might want to consider the VA cash out refinance option if you would like to tap into the equity of your home.
- As with any loan there are closing costs
2018 VA IRRRL Changes
The VA IRRRL has gone through a few changes in 2018 due to what is called mortgage churning. Mortgage churning is a practice of targeting veteran homeowners to convince them to refinance in a short period of time. These new rule changes have been made to protect veterans from these predatory lending practices.
- A seasoning period of at least 6 months
- Suffient benefit terms of dropping at least half a percentage point when refinancing on a fixed rate mortgage
- Suffient benefit terms of dropping two percentage points when refinancing on a Adjustable Rate Mortgage
- You must be able to recoup your closing costs in 36 months
How do I Qualify for a VA IRRRL?
Qualifying for the VA IRRRL program basically has two main factors. If you are a current homeowner that used your VA benefits to purchase your home chances are, if you qualified for a VA loan in the first place, then you are qualified for the IRRRL program. That being said there are a few exceptions to this, and requirements can vary, but generally speaking, that is the case. The second factor is your current situation. If the IRRRL benefits your current situation and it makes sense then there is usually no problem. If the Interest Rate Reduction Refinance Loan is something that you would like to consider the best thing to do is call 855-956-4040 to talk to a VA mortgage specialist.
If you’ve gotten married since you got your VA loan, and are wanting to add your new spouse as an obligor on the loan, you may be able to use an IRRRL to do so but it will at least need to be submitted for prior approval to the VA, and will not be nearly as “streamlined” as it would be otherwise. The same is true for a divorce where one or more of the obligors are getting taken off the loan. In cases of joint VA loans where the obligors change, an IRRRL is usually not possible. This is one way that your situation can disqualify you from being able to use an IRRRL to refinance your loan. In these cases, you will need to use a standard refinance to update your mortgage. A change of obligors is not the only situational variable that affects your ability to use an IRRRL.
If you are needing to get cash-out on your refinance for any purpose other than energy efficient improvements to your home, you will not be able to use an IRRRL to do it. While this isn’t strictly to do with “qualifying” since it’s completely up to you, it is something that can narrow down the possible situations where you can feasibly use an IRRRL. The best use for an IRRRL is to secure a lower interest rate. When you start to try to use an IRRRL for other purposes, it can be hit and miss as to whether you’ll be able to or not. The last points we’ll cover are the VA’s “benefit to borrower” guidelines that affect whether or not you can get an IRRRL.
The VA requires that an IRRRL results in a net benefit to the borrower. They require that your interest rate must lower as a result of the IRRRL unless you are going from an ARM to a fixed-rate mortgage. ARM loan interest rates are calculated differently, and are often lower than their fixed-rate counterparts. The VA also requires that your principal and interest payment becomes lower (which usually happens by default when the interest rate lowers), or the remaining term on the loan must decrease. Even if you secure a lower interest rate, your payment might get higher if you choose a shorter term, since you’re paying off more principal each month.
If you would like to learn more about the VA IRRRL program and see if you qualify call (855) 956-4040 to speak with a licensed VA loan specialist.