Things You Need To Know about VA IRRRL loans
If you are a veteran with a current VA loan, you have a powerful refinancing tool at your fingertips. It’s called the VA IRRRL program or the Interest Rate Reduction Refinance Loan. As a veteran, you can secure this loan and will have to supply very little verification.
Click to begin the VA loan refinance process.
If getting a lower rate without verifying your income or home value sounds too good to be true, keep reading.
Of course, every situation is different and each lender has their own requirements. In general, though, the VA IRRRL requires a timely mortgage payment history and a net tangible benefit. The rest of the qualifying factors can be used from your original VA loan.
Before you jump on board with the VA streamline refinance, there are 10 things you should know.
- You’ll pay a funding fee.
The VA streamline refinance promises to save you money and help you refinance in a quick fashion. But, that doesn’t mean you get away without paying the VA. You’ll pay a funding fee again; it just won’t be the 2.15% you likely paid for youroriginal loan. This time around, you’ll pay 0.5% of your loan amount. Keep that in mind as you calculate your savings.
- You can refinance without lowering the rate.
The idea behind the VA streamline refinance is to secure a lower interest rate. But, there is one case where you might have a higher rate and still get approved. If you refinance from an ARM to a fixed rate, you might have to take a slightly higher interest rate than your teaser ARM rate. This is normal. ARM rates are set low initially to entice you to take the loan. If you opt for the fixed rate loan, just make sure your payment doesn’t increase more than 20% otherwiseyou can’t use the streamline program.
- You can’t take cash out of your home’s equity.
The VA streamline loan is strictly to help veterans lower their payment or refinance out of a risky loan. It’s not a way to tap into your home’s equity. But, there is one exception. You may be able to add up to $6,000 in energy efficient changes to your home. You’ll need to run the changes past your lender to make sure they qualify for the program, though.
- You can’t pay off your second mortgage with the VA IRRRL.
Just like you can’t tap into your home’s equity with the VA IRRRL, you also can’t pay off any other liens or debts with it. The only items you can include in your VA streamline loan amount are the outstanding principal balance of your current loan, eligible closing costs, and the funding fee. If you have a second mortgage, you will need the lender to agree to subordinate the loan in order to proceed.
- You don’t need to use your existing lender.
Click to See the Latest VA Refinance Rates.
Even though you have an existing VA loan, you are free to obtain the VA IRRRL with any other VA approved lender. It may not hurt to obtain a quote from your current lender, but try to get a few quotes from other lenders too in order to compare your options.
- VA lenders can add their own requirements.
Even though the VA IRRRL doesn’t require verification of your income, employment, credit, debt ratio, or home value, a lender can require any of these things. The lender funds the loan, so they can add any rules they want to the VA’s rules to minimize the risk of default. If you know you are upside down on your loan or you have bad credit, find a lender that won’t require verification of these items.
- You must be current on your payments.
The VA requires that you wait 6- 12 months after taking out your VA loan to refinance with the VA IRRRL program. If you’ve had the loan for less than 12 months, you’ll need a perfect payment history. If you’ve had it for at least 12 months, you may be able to have one 30-day late payment and still qualify for the loan. This may vary by lender.
- You don’t need a new Certificate of Eligibility.
The new lender will ask for your VA case number. That’s all they need to determine your eligibility. This can save you a little time and hassle as you don’t have to dig up your certificate or waste time obtaining a new one.
- You can shorten your loan’s term.
You can go from a 30-year fixed loan to a 15-year fixed loan with the VA IRRRL. Your payment will increase, so make sure you can afford it. You also need to make sure your payment doesn’t increase more than 20%. If it does, the lender will have to verify your income and debt ratio to make sure you qualify for the loan.
- You don’t have to live in the home.
Even though the VA loan is for owner-occupied properties only, this rule doesn’t apply to the VA IRRRL program. In other words, you can be renting the home out and still refinance it without worrying about violating any VA rules.
Click here to get matched with a VA lender.