VA loans were conceived to give veterans a way to buy a home with no money down as a way to say thank you for their service. They have flexible requirements and don’t require veterans to purchase private mortgage insurance. A good percentage of a given VA loan is guaranteed by the government, so the loans are safe and come with competitive interest rates.
As a veteran homeowner, you may have heard about VA refinancing, specifically, the VA IRRRL program. IRRRL stands for Interest Rate Reduction Refinance Loan. The VA IRRRL program, also known as the VA streamline refinance or VA-to-VA loan, is one of our favorite loans here at Low VA Rates and one of the most popular refinancing options among veterans. It’s the quickest, simplest way for those who qualify to get a lower interest rate on their mortgage. A VA refinance is especially advantageous now with interest rates on the decline industry-wide.
What Is the VA IRRRL Program?
The Interest Rate Reduction Refinance Loan was designed with one goal in mind: to provide veterans with actual, tangible benefits, specifically, to lower their interest rate. Some loans are structured to put more money in the loan originator’s pocket, but not the IRRRL program. The VA IRRRL is fast, easy, and effective, requiring no down payments and little-to-no underwriting, depending on your lender. That means you won’t have to re-obtain a Certificate of Eligibility or provide proof of income a second time. According to the VA, you will not even need to have your home re-appraised.
Loan-to-value ratio requirements and employment verification are also eliminated in this slimmed-down streamline process. In short, all the paperwork you did before for your original VA loan will count for your IRRRL. And we at Low VA Rates never set any minimum credit score requirements, so you won’t have to worry about your credit score preventing you from being approved for refinancing. Additionally, closing costs can be rolled into the principle loan amount, so next to nothing is paid out-of-pocket at closing. This may, however, increase your interest rate, so it’s up to you and your loan officer to decide which course of action is more cost effective in the long run.
Through the IRRRL program, borrowers can refinance from fixed rates to adjustable rates or vice versa. The VA IRRRL Program is designed to lower your interest rate, however, when switching from an ARM to a fixed rate, rates may go up due to the nature of the fixed loan. You may also be able to change the term of your loan, such as switching from a thirty-year loan to a fifteen-year loan. Cutting your term in half will effectively double your monthly payment, but it will allow you to pay off your loan faster and pay less into interest over time. So talk with your loan officer to make sure it’s your best course of action.
As far as size goes, streamline refinance loans are limited to the balance of the original loan, and they can take up to a month to complete or as little as 10 days.
Finally, no cash back is permitted in the VA IRRRL program. Veterans may opt for cash-out refinancing to get some extra money for remodeling or improving their home. Even though this isn’t an option for streamliners, the VA IRRRL program does allow for a $6,000 energy efficiency fund given through the EEM. This money can go towards anything that increases your home’s energy conservation, such as the installation of solar panels.
IRRRL Program Requirements
So, when exactly can you do the streamline refinance? At Low VA Rates, we have no seasoning requirements, meaning you can refinance as early as one day after closing on your loan. Of course, there are other requirements concerning when and how you can refinance using the VA IRRRL program. For example, you must use your IRRRL to pay for your existing VA loan. Remember, only VA loans can be refinanced using the IRRRL. Streamline refinancing reuses your VA eligibility; that’s why it’s sometimes called a VA-to-VA loan. Also, VA loans are assumable, so eligibility can pass from seller to buyer. If there is ever any question about your VA entitlement, simply ask for your Certificate of Eligibility.
Another requirement of the VA IRRRL program is that if you have a second mortgage, it must be subordinated to the VA loan. You can also use your IRRRL for an investment property that isn’t your primary residence, so long as you verify that you used to live there. This is different from occupancy requirements for ordinary VA loans. For those, you must verify that you plan to occupy the home. But with the IRRRL program, you can refinance a house you no longer occupy.
It’s best to be current on your mortgage before you take out an IRRRL, but if you aren’t, it’s not the end of the world—you have a 30-day grace period for delinquent payments. However, you must explain to your loan officer and to the VA why your payments are late and what your plan is for getting current again.
Something borrowers may not know is that refinancing will pause your mortgage payments temporarily. This is sort of an accidental benefit, but it might help you find the money you need to become current. If you don’t want your payments to be deferred during refinancing, simply talk to your loan officer to work out a different schedule.
Who Is Eligible for the VA IRRRL Program?
To be eligible for the VA IRRRL program, you’ll need to have served more than 90 days on active duty during wartime. During peacetime, the required number of days on active duty rises to 181. If you served in the National Guard or the Reserves, you’ll need to have done so for a period of at least six years. Spouses of veterans who died in combat or whose death resulted from a service-related injury or disability may also be eligible to take out an IRRRL. Additionally, divorced and\or remarried veterans may qualify for the VA IRRRL program.