Do you want to secure a lower interest rate on your VA loan? The VA makes the refinance process simple with their VA IRRRL program. Otherwise known as the Interest Rate Reduction Refinance Loan, this program allows you to refinance by verifying only your mortgage payment history. As long as you have a net tangible benefit for refinancing and you pay your mortgage on time, you should be able to refinance.
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So what are the steps to use this great program? Keep reading below to learn more.
Choose a Lender or Lenders
With the VA streamline refinance, you don’t need to use your current lender. You are free to use any VA-approved lender. Take your time and shop around with several lenders. Don’t worry, though, they don’t have to pull your credit, so you won’t damage your credit score by doing this. Even if they do pull your credit, the credit bureaus treat this as one inquiry since you are shopping for the best rate.
As you look for lenders, keep a few things in mind:
- Do they require a credit report?
- Do they require you to verify your income/debt ratio?
- Will they use the original value of your home for the appraised value?
The VA doesn’t require lenders to pull your credit, verify your income, or order a new appraisal. Some lenders will still do this though because they want to make sure you are still a good risk. If you don’t want to verify these items, find a lender with minimal requirements.
Complete the ApplicationProcess
Once you choose a lender or lenders, you’ll need to fill out a loan application. This is the same document you completed when you bought the home. The lender needs to know your personal identifying information as well as basic information about your employment, income, and debts.
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In the case of the VA streamline refinance, you’ll also have to provide your VA case number for the lender to verify your eligibility. You can complete this process with as many lenders as you see fit. You can narrow your choices down after you receive the rate quotes from each lender.
Finalize Underwriting
Once you choose a lender, you’ll go through the underwriting process. Normally, this is when lenders ask for proof of your employment, income, and assets. In this case, the lender may not need to ask for anything. They will need to verify your mortgage payment history, which may require you to provide your latest mortgage statement. They’ll also need to verify that the refinance benefits you in some way, such as with a lower payment. Depending on the chosen lender, though, you may have to provide other documents. Stay in contact with your lender and respond to any requests as quickly as you can.
During the underwriting process, the lender will also need to order title work on your home. This is just a way for the lender to make sure there aren’t any liens on your home. The title examination will let the lender know if the home has any other liens outside of the first mortgage loan.
Lock in an Interest Rate
At some point you will have to lock in an interest rate on your VA loan. This step is difficult because it means choosing the rate now and forgoing any future rates that may be lower. Make sure you choose the rate wisely, as it’s likely oneof the main reasons you are refinancing in the first place.
Close on Your VA Loan
The final step is to close the VA loan. You’ll be able to take this step once underwriting is finalized. The lender will let you know when this is, but it usually happens fairly quickly since there’s not a lot the lender has to verify.
At the closing, you may have to pay closing costs, if you didn’t wrap them into your loan. The lender will pay off your existing mortgage and set up your escrow account, if you set one up. If you wrapped the closing costs into your loan, you’ll sign some papers and walk away with a new mortgage with a lower interest rate or a better term.
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