IRRRL Program Pros and Cons
In this article, we will explore the IRRRL program pros and cons. The IRRRL is also known as the streamline refinance. IRRRL stands for Interest Rate Reduction Refinance Loan.
There are a lot of benefits associated with the VA IRRRL program. Some of these benefits come hand in hand with it simply because it is a “streamline” refinance. Other benefits come from the specific policies and terms the VA has in place to make the streamline refinance a more attractive option for veteran borrowers. While there are many pros to the IRRRL, there are also a few cons or situations it may not be appropriate. We will go over the IRRRL program pros and cons however in this article we will focus a little more on the IRRRL benefits.
The VA Streamline Refinance is Amazingly Fast
Many of the pros that come with the VA IRRRL come by virtue of it being a streamline refinance option. The first major benefit is that an IRRRL is wickedly fast – being able to be completed sometimes in as little as 10 – 15 days. Compared to the 30-45 day average for new purchase loans and standard refinances, an IRRRL is done and closed before you can blink. An IRRRL is also relatively painless compared to normal refinances; when you get an IRRRL, you will not be required to verify your income, assets, or employment, which saves enormous amounts of time. You will also not be required to get a new appraisal of your home, which saves you both time and money. Being a streamline, the IRRRL is designed to make the process fast, easy, and affordable for you. In addition to all of the above benefits, there are also benefits to the IRRRL that the VA has implemented to make it more available and attractive to more veteran borrowers.
Roll in Your Closing Costs with the VA IRRRL
One of those benefits would be in the area of closing costs. If you have purchased a home before you know that you cannot “roll” in your closing costs. What I mean by that is that when you purchase a home you cannot include the closing costs or escrows into your mortgage payment. This is the case on some refinances loans as well, such as another popular government-sponsored loan, the FHA refinance. FHA offers a streamline process similar to the VA IRRRL however you cannot include your costs. With the VA IRRRL, you can include or “roll” your escrows and any loan costs into your loan. The IRRRL also allows you to buy discount points in order to reduce your rate even further. The best part is you can include those costs as well and save even more money every month. This saves you sometimes thousands of dollars!
VA IRRRL Guidelines
Another great benefit to the VA IRRRL is in the guidelines. The VA IRRRL guideline states that a Veteran will qualify for a VA IRRRL only if he/she can reduce their monthly payment, all fees that are incurred must be recouped within 36 months. Also, you must have made at minimum 6 mortgage payment on your loan and be at least 210 days from the date your first payment was made. These are all in place to protect the Veteran from predatory lending. Prior to these guidelines being put in place loan officers would give Veteran borrowers higher rates and then give them an IRRRL a month later charging them new fees over and over again. Now, Veterans only do an IRRRL when it makes financial sense, the way it should be!
More Relaxed Occupancy Requirements
Another cool thing about the IRRRL is that it has a looser occupancy requirement. For a borrower trying to get an IRRRL, they simply have to certify that they previously occupied the property, rather than that they currently do. This is designed with active servicemembers in mind. Often, an active servicemember buys a house, then receives PCS orders and is required to move and try to sell their current house as quickly as they can. Many a servicemember has been hurt financially because of this situation. So, the VA decided that those servicemembers should be able to quickly (as little as 10 days) get an IRRRL to refinance their home so they can rent it out rather than have to sell it. This is a major boon to active servicemembers doing their best to make a good home for their families in spite of the oft-changing military life.
Energy Efficiency Mortgage (EEM)
Lastly, the IRRRL does allow a borrower to take out an Energy Efficiency Mortgage (EEM) on top of their new loan. An EEM allows a borrower to take up to $6,000 to make energy efficient improvements to their home. The borrower will have to itemize the improvements they wish to make, and only the amount required to make the changes will be lent, but a lot can be done to improve a home for $6,000. There are numerous other little benefits that could be discussed, but we’ve covered the major ones here.