VA Refinance Loan also know as Streamline refinance or IRRRL, is designed to Help Veterans lower their current VA mortgage interest Rate.
An IRRRL stands for Interest Rate Reduction Refinancing Loan, is a VA-guaranteed loan made to refinance an existing VA-guaranteed loan, generally at a lower interest rate than the existing VA loan, and with lower principal and interest payments than the existing VA loan
This Federally insured loan program was created by the Veterans Administration in order to help veterans and active duty members, who currently have VA mortgage, take advantage of lower mortgage interest rates.
This VA loan guaranty program, which is also referred to as IRRRL (Interest Rate Reduction Refinancing Loan Program), is straightforward and simple for US Veterans and active duty members to qualify for. Keep in mind, that you can use the terms IRRRL and VA Streamline Refinance Loan interchangeably.
Why the Program Was Developed?
This program gives Veterans and active duty service men and women a fast simple process to refinance their current mortgage loan.
Here are the Highlights of the VA Streamline Refinance Loan program:
- Appraisal of your home is NOT required
- Any closing costs are rolled into the new loan - You can't receive any cash out, however
- No bank statements, job verification, pay stubs are needed as conventional underwriting process does NOT apply.
- Minimum FICO (credit) score is 620. In the last 12 months you cannot have more than ONE 30 day late payment on your current VA mortgage.
- Energy efficiency improvements to your home can be rolled into the loan amount.
- Reduce your monthly payment by reducing your interest rate.
- Easily transition from an ARM to Fixed rate mortgage.
- It is an inexpensive way to lower their mortgage bill.
- Almost all Vets qualify
Facts about VA Loan or Interest Rate Reduction Refinancing Loans (IRRRL).
- A veteran who obtained a VA guaranteed loan may refinance it with another VA guaranteed loan at a lesser interest rate without using additional entitlement.
- Note: IRRRLs can only be used to refinance existing VA guaranteed loans.
- The new loan must be at a lesser interest rate than the old VA loan except when refinancing an existing adjustable rate mortgage with a new fixed rate mortgage.
- The dollar amount of guaranty applicable to the prior VA loan is transferred to the new loan.
- The minimum guaranty on a IRRRL is 25%.
- If the existing loan is delinquent, the IRRRL must be submitted to VA for prior approval.
- Although no underwriting is required, approval of new credit may be required by the trustee in a Chapter 13 bankruptcy.
- The veteran may not obtain cash proceeds.
- No portion of the loan proceeds may be used to pay off other debts.
- The new loan is limited to the balance of the old loan, the funding fee, and up to $6000 of energy efficient improvements, and allowable closing cost including not more than 2 discount points.
- The term of an IRRRL may not exceed the original term of the loan being refinanced by more than 10 years.
- The veteran, including active-duty service members stationed elsewhere, is able to satisfy the occupancy requirement by certifying prior occupancy.
- If the veteran whose entitlement was previously used has died, and the surviving spouse was a co-obligor, that spouse is considered a veteran for the purpose of the IRRRL.
Refinancing from an adjustable rate loan.
Refinance could lower foreclosure risk - If you have an (ARM) adjustable rate mortgage, your housing bill may very well INCREASE when the fixed period expires. Depending on your exact mortgage terms, which is usually anywhere from 3-5 years.
It's not uncommon for your interest rate to jump dramatically - 2 to 5 percentage points after your ARM expires forcing you into conventional "refinance". The results can be devastating financially as you may not be able to afford to keep your home.
If you NEED to get out of an ARM and into a fixed rate mortgage!
IRRRL can help you accomplish this.
If you’re not sure you have an adjustable rate mortgage, check with your mortgage company ASAP, you need to know when the adjustable period expires so you can take action and get into a fixed rate mortgage using the IRRRL program.
It's quite common that you may NOT realize you have an ARM! It could have been the way the loan was explained to you and didn't realize the interest rate could adjust after 1 to 3 years. If that's the case and you are Vet, it's time to take action NOW!
Take advantage of lower interest rates - What if today's interest rates are lower than the interest rate you are currently paying? If you simply want to reduce your monthly payment, an IRRRL may drastically reduce the overall dollar amount spent on interest by lowering your interest rate.
