The VA IRRRL makes it possible for veterans to refinance with little verification required. The VA approved lenders rely on your mortgage payment history and the benefit of the refinance for your loan approval. Generally, you cannot take any cash out with this loan program, but there is one exception to the rule. You can make up to $6,000 in energy efficient improvements to your home upon approval.
Find out if you are eligible for a VA loan.
Qualifying for a VA IRRRL With Energy Improvements
Before you can determine if you qualify to make energy efficient improvements to your home, you first have to qualify for the VA IRRRL. Luckily, the guidelines are very simple and easy to meet:
- You must have had the loan for at least 12 months and have no more than one 30-day late payment during that time.
- If you have had the loan for less than 12 months, you may get an exception, but you cannot have any late payments during that time.
- There must be some type of benefit for the refinance.
As you probably noticed, you don’t need a specific credit score, LTV, or amount of income. The VA doesn’t require lenders to verify any of those items. They rely on your timely mortgage payment history and the fact that you benefit from the refinance.
Benefiting from the refinance usually means a lower payment, but you might benefit in other ways such as refinancing out of an ARM or into a shorter term.
How to Include Energy Efficient Changes
You should know that you won’t be able to make just any energy efficient changes. You can only make those that will help lower your utility bills. This is how the VA offsets the increase in the mortgage, but knowing that your utility bills will be less.
The VA lender will require an energy audit on your home. Typically, your local energy company can do this for you. The auditor will look at the potential changes and determine how much they will affect your home’s utilities. If you plan to borrow the full amount at $6,000, there needs to be significant savings on your utility bills.
Compare Offers from Several VA Mortgage Lenders.
If you only plan to add up to $3,000 in energy efficient changes, the VA doesn’t require lenders to care as much about the savings. Basically, the lender just wants to make sure that the increase in your mortgage payment will be worth it by saving on your utility bills.
A few of the changes you can make include:
- Add energy efficient windows and doors
- Install a programmable thermostat
- Add insulation or solar panels
- Add weather stripping around windows or doors
Figuring Out Your VA IRRRL Loan Amount
Remember, the maximum of $6,000 for energy efficient changes is the only money you can add to your loan amount that resembles cash out of the home’s equity. Aside from the energy efficient changes, you can only include the following in your VA loan amount:
- The full amount of the outstanding principal balance
- The closing costs you plan to roll into the loan (VA approved only)
- The VA funding fee
- Any prepaid interest on your new loan
If you add money for energy efficient changes, it can only be for the exact cost of the changes and nothing more. You are not able to receive any cash in your hand – the lender will pay the contractors directly.
If you can make energy efficient changes to your home and lower your utility bills, it may be worth it. Make sure the total cost of the interest for borrowing the money is worth it though, before you take the loan. Ask different lenders for quotes both with and without the energy efficient changes so that you can make the right choice for you.
Click to See the Latest VA Refinance Rates.