What is the VA IRRRL ?
The VA IRRRL is a simple way to refinance your current VA
loan into a lower rate and monthly payment.
IRRRL stands for “Interest Rate Reduction Refinance
Loan.” This loan program is also known
as the VA Streamline Refinance or a VA-to-VA refinance.
Like all VA loans, IRRRLs have backing from the U.S. Department of Veterans Affairs which helps veterans, active duty service members, and their families borrow with favorable terms.
This refinance program has a streamlined application (no credit, income, or employment verification) and you might not need an appraisal.
Closing costs also tend to be lower, and can be rolled into your loan to eliminate upfront charges.
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Today’s VA IRRRL rates
VA refinance rates are typically some of the lowest interest rates on the market.
For instance, today’s average rate for 30-year VA refinance is 2.25% (2.421% APR), according to our lender network*. Compare that to 2.75% (2.75% APR) for a conventional loan.
Of course, VA refinance rates vary by customer. Your rate will likely be higher or lower than average depending on your loan size, credit score, loan-to-value ratio, and other factors.
|Loan Type||Today’s Average Rate|
|VA 30-year fixed-rate||2.25% (2.421% APR)|
|VA 15-year fixed-rate||2.25% (2.571% APR)|
*Average rates assume 0% down and a 740 credit score. See our full loan VA rate assumptions here.
How the VA IRRRL works
The VA IRRRL lets veterans and service members refinance a current
mortgage loan to a lower rate and
The biggest benefits of using a VA Streamline Refinance over another refinance loan are:
- Limited paperwork required
- VA IRRRL rates are exceptionally low
- Appraisal typically not required (saves money and time)
- May be able to refinance with little or no equity
- You might have low or no closing costs
- No credit, income, or employment verification required (good if your credit score or income have been reduced)
- Available to most veterans and active duty members of the armed forces from all branches, including many Reserves and National Guard members
The VA Streamline loan program is extremely popular because it’s easy to use. If you already have a VA mortgage on your home, the IRRRL program makes refinancing to a lower rate relatively quick and painless.
That’s because your lender isn’t
required to do time-consuming paperwork, like income and employment
verification. And some borrowers can even skip the home appraisal when they use
a VA streamline refinance.
That said, lenders can set their own requirements for credit checks and appraisals. So if you want to skip these steps, be sure to shop around and ask about lenders’ policies before you apply.
Is the VA IRRRL program worth it?
As with any refinance, using the VA
IRRRL results in a brand new loan. So your mortgage will start over at 30 or 15
years, depending on which loan term you choose.
But using the VA IRRRL is worth it for many homeowners.
That’s because today’s ultra-low VA rates can result in a much lower monthly payment, and save you thousands in interest payments in the long run.
Another big benefit? VA loan closing costs can be rolled into the loan. This allows veterans to refinance with little or no out-of-pocket expenses.
Sometimes it is also possible
for the lender to take the brunt of the cost in exchange for a higher interest
rate on your loan.
How to qualify for the VA IRRRL
In order to qualify for a VA IRRRL refinance, your current mortgage must be a VA home loan.
Other requirements for the IRRRL include:
- You are current on payments with no more than one 30-day late payment within the past year
- Your new rate and monthly payment for the IRRRL must also be lower than the previous loan’s monthly payment. The only time this condition does not apply is if you refinance an ARM to a fixed rate mortgage
- You must not receive any cash from the IRRRL
- You must certify that you currently or previously occupied the property
- You must have previously used your VA Loan eligibility on the property you intend to refinance. You may see this referred to as a VA-to-VA refinance
You can easily figure out if you meet the VA IRRRL guidelines by checking with your current mortgage lender, or any other lender that’s authorized to do VA loans (most are).
Can you get cash back on the VA IRRRL?
Homeowners are not allowed to get cash-back with the VA IRRRL program.
There’s just one exception: IRRRL users may get up to $6,000 cash-back if they plan to use it for energy-efficient home improvements.
For everyone else, there is a VA Cash-Out refinance loan.
The Cash-Out refinance allows borrowers to refinance their conventional or VA loan into a lower rate while also taking cash from the home’s value.
The VA Cash-Out refinance loan replaces your existing mortgage, instead of simply withdrawing cash like a home equity loan.
A qualified borrower can refinance up to 100 percent of the home’s value using a VA loan in some cases.
One big benefit is that the VA Cash-Out refinance can be used regardless of your current loan type — whether VA, USDA, FHA, or conventional.
Just like the VA Streamline Refinance loan, the home must be used as a principal dwelling by the owner.
There is no set period of time that you must have owned your home, however, you must have enough equity to qualify for the loan.
VA IRRRL FAQ
VA IRRRL rates are typically the lowest of any loan type. They are more affordable than conventional or FHA loan rates. With today’s low rates on mortgages of all types, homeowners using the VA IRRRL refinance can get especially good deals.
The VA funding fee is required for the VA IRRRL refinance. It’s 0.5% of the loan amount. You have the option to roll the funding fee into your loan amount when using the IRRRL, so you don’t have to pay it upfront in cash.
Just remember, rolling the VA funding fee into your loan means you’ll pay interest on that amount over the life of your loan.
The VA funding fee for an IRRRL costs just 0.5% of the loan amount. That’s lower than the funding fee for other VA loans, which range from 1.4% to 3.6% of the loan amount depending on your down payment and whether you’re used a VA loan before.
Closing costs for a VA Streamline Refinance are similar to other VA loans: usually 1% to 3% of the loan amount. However, you may be able to skip the home appraisal, which can save around $500 to $1,000.
The time it takes to refinance using an IRRRL varies a lot, depending on the borrower and lender. If all goes smoothly, a VA IRRRL might close in under a month — which is faster than most refinances. However, a complicated loan application or a busy loan officer can bog down the process.
The VA requires you to wait 7 months (210 days) from your last loan closing before using the VA Streamline Refinance. However, some VA lenders impose their own waiting period of up to 12 months.
If your current lender says it’s too soon to refinance your VA loan after 7 months, it might be worth shopping for another lender that will let you refinance sooner.
First, make sure you’re qualified for a VA refinance. (See the VA’s refinancing guidelines here.) Then, check rates from a few different lenders. You do not have to refinance with your current lender, and most people can find an even lower rate and payment by shopping around.
Once you choose a mortgage company, you’ll submit your loan documents and get approved. A VA Streamline Refinance requires less paperwork than other loan types, and may let you skip the home appraisal. With an experienced lender, VA refinancing can take less than a month from end to end.
Since you used your Certificate of Eligibility to get your first VA loan, you won’t need it to qualify for a streamline refinance of your existing VA mortgage.
If you’re using the VA Cash-out Refinance to replace a conventional, FHA, or USDA loan, you’ll need a Certificate of Eligibility to access VA borrowing benefits.
No, it does not. The Department of Veterans Affairs insures VA loans, which allows lenders to offer more favorable terms. However, it’s the lenders — not the VA — that set rates and borrowing requirements for borrowers.
No, you do not. In fact, you should shop around with various lenders, as each will offer different interest rates for your VA loan. All that matters is that the lender is VA-approved. Because so many lenders finance VA loans, it makes sense to shop around.
The VA does not require another credit check or appraisal using a streamline refinance, because you have already been approved for a VA loan once.
However, many lenders require a credit check and employment verification to guarantee you are still financially stable enough to pay for your mortgage.
Some lenders also require a new appraisal for the VA streamline. However, since skipping the appraisal is one of the main benefits of an IRRRL, we encourage you to shop around if your lender requires one.
If you are going from a fixed-rate mortgage to another fixed-rate mortgage, the VA requires your IRRRL to have a lower interest rate. But if you are moving from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, the VA will allow you to refinance to a higher interest rate.
Yes, you may receive up to $6,000 cash-in-hand at your IRRRL closing. The cash, however, must be used for energy-efficiency improvements, and must be a reimbursement for improvements made within 90 days prior to closing.
Some VA borrowers will also receive cashback if they prepaid taxes and insurance on their previous loan, and some of those funds went unused.
There is no loan limit for a VA loan. However, a VA Streamline Refinance will be limited to the existing loan balance plus any accrued late fees and late charges, plus typical loan costs and the cost of any energy efficiency improvements.
In general, the borrower(s) obligated on the original VA loan must be the same as borrower(s) obligated on the refinance. However, this is not always possible. As an example, assume that a veteran and spouse are obligated on an existing VA loan.
An IRRRL is possible in all of the following scenarios: Divorced veteran alone; Veteran and different spouse; and, surviving spouse alone because the veteran died. An IRRRL is not possible for a divorced spouse alone, or a different spouse alone because the veteran died.
Yes, you can use the VA Streamline Refinance for an investment property. You must certify that you previously lived in the property as the primary residence. However, you no longer need to be living there full-time at the time you refinance.
Yes, you can VA Streamline Refinance a loan which is behind in payments or delinquent. Your lender will want to know that the cause of the delinquency has been resolved; and you must be willing and able to make the payments on the new VA loan.
Lastly, you will be asked to provide a letter to explain the delinquency along with additional supporting documentation. The Department of Veterans Affairs will make a final determination whether the IRRRL should be approved.
Yes. All VA loan options allow
s for 100% financing with no down payment. In addition, VA loans do not charge annual mortgage insurance. Only a one-time, lump-sum funding fee.
Lenders may charge a loan origination fee up to 1% of the loan’s value.
The VA does allow you to buy discount points to get a lower mortgage rate. Just note, you can only finance two discount points. Additional points will require an upfront cash payment.
Discount points typically cost 1% of the loan amount and lower interest rates by 0.25%. Discount points can save you money if you keep the loan long-term.
Shaving half a point from your interest rate can save a noticeable amount on your monthly mortgage payments. With a $200,000 loan, for example, you’d save about $50 a month by refinancing a 4% interest rate loan to a 3.5% rate.
But the bigger impact from a low rate plays out gradually over time. In the example above, the homebuyer could save about $20,000 over the life of the loan by getting the lower rate.
A lower rate can help you buy more expensive real estate or save money on interest. However, make sure your savings justify the expense of refinancing, including closing costs and the VA funding fee.
Check VA mortgage rates
The VA Streamline Refinance is one of the simplest and fastest mortgage products available for consumers today.
Current rates are low, so it’s a great time to take advantage of your veteran benefits.
Check with top-rated and VA-approved lenders for your refinance.
Published at Fri, 02 Oct 2020 11:45:54 +0000