How do I Qualify for a VA Streamline?
Qualifying for an IRRRL has two aspects. The first is all about you – are you qualified for an IRRRL? Chances are, if you qualified for a VA loan in the first place, then you are qualified for an IRRRL. There are exceptions to this, and requirements can vary, but generally speaking that is the case. The second aspect is about situation. Where are you coming from and where are you using your IRRRL to go? The second aspect is usually more of a variable than the first, but we’ll cover as many eventualities as possible in this article.
As far as those of us here at LowVARates are concerned, as long as you qualified for a VA loan in the first place (which you had to have in order for an IRRRL to even be an option), and are current on your payments, we consider you qualified. LowVARates is somewhat unique among VA-approved lenders in that we take the VA requirements from the VA Lender’s Handbook and stick with them without adding any of our own. Many lenders have additional requirements to minimize their risk, and that is certainly their prerogative, but we feel that the VA’s outlined requirements are sufficient for us. As you look from lender to lender, this is one factor to look at – which lender has the right mix of requirements that make you the most comfortable? Remember also that banks and lenders (including us) sometimes change their requirements for approval in response to market conditions. A lender’s requirements today may be different next year.
That’s as complicated as it gets for getting you qualified; here at LowVARates, you are qualified as long as you are up-to-date on your mortgage payments and are the VA-eligible borrower on an existing VA loan. For qualified circumstances, though, it gets a bit more complicated.
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.