The VA Interest Rate Reduction Refinance Loan (IRRRL) is a program offered by the Department of Veterans Affairs (VA) that allows military veterans and their families to refinance their existing VA home loans at a lower interest rate.
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”. 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.
VA Streamline Refinance Pros and Cons
Save money by lowering your interest rate
In most cases no appraisal is required
Employment proof is usually not needed
No dept to income verification
No minimum FICO score check
Change your loan terms
Faster closing times
Option to defer two months of mortgage payments
Usually keep your escrow refund
No cash due at closing
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
The 3 Biggest Benefits
1) You save money and reduce your interest rate.
2) IRRRL loans are much easier and faster to underwrite than conventional mortgage loans.
3) You can roll all your closing costs into the VA IRRRL loan.
The Streamline is Fast & Easy
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
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 service members in mind. Often, an active service member 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 service member has been hurt financially because of this situation. So, the VA decided that those service members 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 service members 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.
VA IRRRL Program FAQ’s
Here are some frequently asked questions about the VA IRRRL program:
What are the eligibility requirements for the VA IRRRL program?
To be eligible for the VA IRRRL program, you must:
Be a military veteran with a VA home loan.
Have a current VA home loan that you want to refinance.
Certify that you have lived in the home as your primary residence for at least six months before applying for the IRRRL.
Can I use the VA IRRRL program to refinance a non-VA loan?
No, the VA IRRRL program is only available to military veterans with a VA home loan. If you have a non-VA loan, you may be able to refinance through a different program, such as a conventional refinance or an FHA refinance.
What is the process for applying for the VA IRRRL program?
To apply for the VA IRRRL program, you will need to:
Gather all of your financial and personal documents, including your most recent mortgage statement, proof of income, and proof of insurance.
Find a VA-approved lender and submit your application and supporting documents.
Wait for the lender to review your application and provide you with a loan estimate.
Review the loan estimate and decide whether to move forward with the loan.
If you decide to move forward, the lender will process the loan and schedule a closing date.
Can I use the VA IRRRL program to get cash out of my home?
No, the VA IRRRL program is not designed to provide cash out to borrowers. It is designed solely for the purpose of reducing the interest rate on an existing VA home loan.
Are there any fees associated with the VA IRRRL program?
There may be some fees associated with the VA IRRRL program, including a VA funding fee and closing costs. The VA funding fee is a percentage of the loan amount that is paid to the VA to help cover the cost of the program. The closing costs can include fees for things like appraisal, credit report, and title search.
How long does the VA IRRRL process take?
The length of time it takes to complete the VA IRRRL process can vary depending on a number of factors, including the lender’s processing time and the complexity of your financial situation. In general, the process can take anywhere from a few weeks to a few months.
Is it possible to get a VA IRRRL with bad credit?
It is possible to get a VA IRRRL with bad credit, but it may be more difficult and you may not qualify for as favorable terms as you would with good credit. If you have bad credit, it is important to work with a lender who specializes in working with borrowers with less-than-perfect credit.
If you would like to learn more about the VA IRRRL program pros and cons call us now at 855-956-4040.
With VA IRRRL, could I qualify moving from a 20-year VA refi to a much lower rate 15-year VA IRRRL, even if the new payment is higher?
Douglas, thank you for the question. Yes, you can adjust the term on your loan while doing a VA IRRRL. In fact, I am doing a number of IRRRL’s just like that. It is amazing how much more or your payment goes to principal instead of interest when you reduce the term even as little as 15 years. If you would like to see what rates are on a 15 year and get an idea of your new payment and how much money you will save over the life of the loan feel free to call us at 855-956-4040.
If I do an IRRRL Refinancing on my house, will this be able to free up my VA COE letter so that I can use it for another home while I try to sell the original house? In other words, I need the VA to guarantee up to my full COE for the new house and due to me being under the present loan that I am under, I don’t have access to 100% of the COE.
I purchased my house in San Diego in July 2019 for $425k at 3.65%. Can I refinance now. I would like to pay off my house in under 10 years.
Hi Omar! Thanks for the question and congratulations on buying your home last year! Now is a perfect time to refinance your VA loan using the VA IRRRL Program. It is a streamlined process that does not require an appraisal or income documentation.
If you would like to get approved for a VA IRRRL you can go to http://www.nationalapplynow.com and complete a secure application. Once I receive it I will structure it and give you a call to discuss. Or you can call us at (855) 956-4040.
I would also like to show you a number of ways to reach your goal of paying your house off quicker. Shaving the interest rate is the first step for sure!
Thanks again for the question. Thank you for your service and have a great weekend!
I want to know if we decide to refinance, do I have to start over at 30-years or where I’m at now?
If I don’t have to start over, will I still be able to get a lower payment?
Samuel, thanks for reaching out to National VA Loans. That is a great question! Mainly because it has multiple answers. When would be a good time for us to chat for a few minutes? Rates are extremely low so you can save money and not lose any ground from the payments you’ve already made.
You can reach me at 855-956-4040. I really look forward to talking to you and working with you to complete your mortgage. Thanks Samuel, talk soon!
I’ve been hearing more and more about China buying up US land and businesses, so my question is: who is backing the lower interest rate and loans?
We have 21 yrs left on our VA loan. We want to payoff in 10 years and are trying to do an IRRRL streamline. A lender told me that you cannot reduce the number of years on a VA loan to less than it would have been and said we would have to get a loan with a longer repayment period (20 or 30 years).
This doesn’t make sense to us, help?
Rocket Morgage with QUICKEN LOANS charged me $400 for a appraisal and want my one month deferred payment to cover closing costs, around $1690. Is this correct for a VA streamline refinance?
I received a letter from a lender called The Federal Savings Bank, offering a VA IRRRL; I talked with a loan rep he pulled my credit, and asked for my DD 214, Employment verification, Homeower insurance, and a copy my Note. Would like to know if all of these documents required, and if The Federal Savings Bank is a real company? Their NMLS ID#411500. I purshased my current home in July 2020, and I do meet all of the VA IRRRL requirements. If I work with National VA Loans would you require all of this info? Thanks.
Thank you for your question. The Federal Savings Bank is real and we have run up against them a number of times. It sounds pretty common what they are asking for. When we do a VA IRRRL we will typically ask for your note, drivers license, social security card, mortgage statement, and insurance agents contact info. Currently we are at 2.25% on a fixed 30 year VA without any fees. Let us know if there are any other questions we can answer or if you would like to take a look at a loan with National VA Loans and Community First National Bank.
I went to the URL you mentioned in one of your replies to start an application but it doesn’t give the option to do an application for the VA IRRRL program, am I missing something? Where do you apply for the VA IRRRL?
You can apply at Nationalapplynow.com or give us a call at 855-956-4040 to speak with a VA loan specialist.
I purchased my house in Utah in July 2020, and my live in partner, a real estate agent, added herself to the title; if I wanted to take her off the title, can I do the VA IRRRL (streamline refinance)?
I am doing a one close va construction and now at 90 days out from build the conversion to a va loan is coming in at 4.75 from original lender on modification. Should I pay another closing to do an IRRl at a much lower 3.4 ?