Overview
A VA Interest Rate Reduction Refinance Loan (IRRRL), sometimes referred to as a VA streamline refinance, allows those who have an existing VA Loan the opportunity to quickly refinance their loan and get a lower interest rate. The IRRRL was created by the VA to allow veterans the ability to capitalize on lower interest rates available today that may not have been available at the time of purchasing the house. When interest rates drop, the IRRRL provides an opportunity for you to save big over the life of your loan.
Guidelines/Requirements
The VA IRRRL Loan does not allow you to pull out cash and can only be used on existing VA Loans. If you are in a conventional loan and want to lower your interest rate you will have to do a cash-out refinance. A IRRRL can be a great tool when looking to lower your monthly payments or make them more stable over time by switching from an ARM (adjustable rate mortgage).
Additionally, like other VA Loans, the VA IRRRL is subject to a funding fee which is paid directly to the Department of Veterans Affairs. These fees are significantly lower than other VA Home Loan products at 0.5% which can be paid either up front or bundled into the full loan amount and paid over time.
Funding fees with IRRRL
VA loans are subject to a funding fee which is added to the total loan. Funding fees work similar to a deductible on car insurance and are paid directly to the VA. These fees are insurance for the VA and helps offset losses should you default on your mortgage.
For typical VA loans and cash-out-refinances, funding fees are 2.3% for first time users and 3.6% for subsequent use. With IRRRL refinances, the fees are significantly lower at only 0.5%. This fee can be bundled into the full loan amount to avoid out-of-pocket costs at the time of refinance. It’s important to note that there are a few times when funding fees may be waived for any VA loan. Some exceptions include when a veteran has a 10% or greater service-related disability or an active duty member has been awarded the purple heart.
Does the home have to be your primary residence?
In order to qualify for a VA loan, you will likely have to reside in the property for at least one full year before renting it out or selling. There are exceptions to this rule for people on active duty if they receive orders that require them to move. With the IRRRL, you are able to refinance your VA loan even if the property is not your primary residence. This means if you’re looking for a lower monthly payment and/or interest rate but don’t live there you are still able to take advantage of this loan option!
Getting Started
The VA IRRRL offers a streamlined process with less paperwork than typical refinancing options. Getting started with this loan is much easier than other VA Loans since you likely won’t need to be requalified. In order to get started you’ll need to contact a VA-approved lender like MHS Lending and present your COE.
Streamlined process
The VA IRRRL offers a streamlined process with less paperwork than typical refinancing options. In most cases, your overall monthly payment will go down and this loan has a much lower funding fee than traditional VA Home Loans. One way it is simplified is that you don’t need to prove your income. Generally, when purchasing or refinancing your home you need to provide paycheck stubs, tax forms, and employment verification. With the IRRRL, these are all not necessary which makes it a quick and efficient option for refinancing.
It’s important to note that this loan is only available if your current loan is a VA Loan and helps you expedite the process and get a lower rate quickly.
What happens next?
It’s time to start your rate search. Use the steps below to lower your interest rate.
- Speak with a VA lender: this phone call will answer a lot of your questions about what your options are and how much money you could save per month.
- Submit all documents to your lender: this will happen right after you and your lender discuss your options. Your lender will supply you with a list of documents to submit and that will get the loan started!
- Lock in your interest: once you and your lender have spoken and come to an agreement and you’ve submitted your documents for review, you’ll be given an opportunity to lock in your interest rate. Typically you can lock it in for 15, 30, 45, or 60 days. Be sure to lock your rate for long enough to get all of the refinance completed. Inspections can take a while so don’t be afraid to go with something outside of 30 days.
- Receive approval: after all your documents have been reviewed you’ll receive underwriting approval and can go to closing.
- Close on your home: after you’ve gone through the full approval process and your new loan is ready to go your lender will give your clear to close.
- Sign your final loan documents: congratulations, you have completed your refinance!
FAQs
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What is the minimum credit score requirement to get approved for a VA IRRRL Refinance Loan?
There is no credit score requirement with the VA IRRRL Refinance Loan. In fact, we often don’t even need to do a hard credit pull!
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What do you mean by streamlined?
The VA IRRRL Loan is one of the quickest and easiest loans to process because there is minimal documentation and no appraisal or termite inspection required. The VA IRRRL is designed so veterans and military families can take advantage of low rates today and since the payment is typically going down with this program, we don’t need to requalify you.
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Can I use the VA IRRRL for investment properties?
Yes! In fact, this is the only VA Loan that can be used on investment properties.
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What are the costs for the VA IRRRL?
The cost can be next to nothing out of pocket since all costs can be rolled into the loan. The VA Funding Fee is also considerably less with the IRRRL than other VA Loans.