Save Time & Money with the VA Streamline Refinance Loan

The VA home loan program, like other loan programs, offers a streamline refinance option. Officially called the Interest Rate Reduction Refinancing Loan, or VA IRRRL, this type of refinance loan comes with plenty of advantages tailored to meet the needs of VA-eligible borrowers.

Some of these advantages include:

  • Lower interest rate*
  • No required out-of-pocket or upfront costs
  • Minimal paperwork
  • No underwriting fees
  • No appraisal (or appraisal fees)
  • No verification of employment or income
  • No minimum credit scores

*Lower interest rates aren't always required when using the IRRRL to switch from an adjustable rate mortgage (ARM) loan to a fixed-rate loan.

In addition, you can also roll the closing costs, including the VA funding fee, into the loan amount, and the process is often often much faster than with a purchase or cash-out refinance loan.

Taken all together, the VA IRRRL is faster, easier, and cheaper than other refinance loan options. So, if you're looking to save money on your mortgage by refinancing a VA loan, keep an eye on VA streamline interest rates so you can find the ideal time to refinance.

Why You Should Consider an IRRRL

IRRRLs are so quick and easy for a lot of the same reasons they are so cheap: less underwriting, less paperwork, and less to-do overall.

Because lenders don't have to analyze income, credit, or employment status, there's less waiting on underwriting. Plus, lenders no longer have to wait for the appraisal to come back and potentially delay the process.

VA streamline refinance loans are also designed to save veterans money. They're called "interest rate reduction" loans for a reason. Unless you're refinancing from an ARM loan to a fixed-rate loan using an IRRRL, you are required to receive a lower interest rate.

IRRRLs also require that you pass the net tangible benefit (NTB) test, which states that you must either receive an overall lower monthly payment or a shorter loan term.

If you are keeping the same term length, or refinancing into a longer loan, the amount you save on your monthly payments for the first 36 months must recoup the total closing costs on the refinance.

The only exception to the NTB test occurs if you choose to refinance an ARM loan into a fixed rate loan.

Another benefit is that you don't have to obtain an updated COE, and the occupancy requirements mean that you don't have to be currently living in the house (just that you did at one point).

Finally, IRRRLs still allow you to make improvements to your home by adding an energy efficiency mortgage (EEM) on to the refinance.

While borrowers are not allowed to get cash out when they use a VA streamline loan, adding an EEM to your IRRRL provides another option for you to make updates and improvements up to $6,000, as long as those improvements will help you save money on your monthly utility bills.

Requirements for a VA IRRRL

We've already briefly discussed some of the requirements to qualify for a VA streamline loan, like the fact that you have to certify your previous occupancy of the home.

However, there are some additional requirements that may be beneficial for you to know:

  • The loan being refinance must already be a VA loan
  • You must have made at least 6 full payments on the loan being refinanced
  • At least 210 days must have passed since your first payment on the loan being refinanced
  • You must not want cash out (except as covered by an EEM)

If you have questions about any of these requirements to receive a VA IRRRL, give us a call. We're happy to explain them to you and answer your concerns.

How to Get a VA IRRRL

IRRRLs are designed to be simple affairs, and quite frankly the only step that you really need to take is to sit down with your lender and explain you're interested in refinancing a VA loan using one.

At this point, it would also be helpful to get quotes on an IRRRL from a few other lenders as well, just to make sure you're getting the best VA streamline interest rates and terms for your situation. It is a common misconception that you must stay with your same lender in order to get a VA streamline refinance. The truth is, any VA lender can give you an IRRRL.

Then, once you decide on a lender, they will be able to walk you through each of the following steps required to complete your application:

  1. Provide your occupancy certification and any other requested documentation
  2. Make it clear whether you will want to get an EEM and decide if you are going to roll closing costs into the loan amount
  3. Wait for processing and respond with any requested documents
  4. Close with the title company
  5. Enjoy your lower interest rate!

If you were able to brave the process of purchasing a home and/or refinancing that home with a standard refinance, the process of getting an IRRRL will be simple enough to do in your sleep. If you need more help or guidance, our experienced loan officers at Low VA Rates are happy to chat with you.

Additional Considerations for VA Streamline Refinance Loans

The IRRRL is a pretty stellar option, especially when compared to many of your other options. However, that doesn't mean it's the Holy Grail of mortgage refinances, or that it's right for your situation and needs.

There are plenty of scenarios when an IRRRL simply isn't the best option for you to refinance your home. Some examples of these situations include:

  • You Want Cash Out – If you're wanting to take advantage of the equity you have in your home for anything other than energy-efficiency improvements, then you'll need to use a normal VA refinance.
  • You Want to Consolidate Debt – Similar to taking cash out, if you want to pay off your high-interest-rate credit card debt with money from refinancing your mortgage, you'll need to choose a different refinance option.
  • You Want a Longer Loan Term – When you refinance with an IRRRL, the resulting term can only be 10 years longer than the original loan terms. So if you have a 15-year mortgage and you want a 30-year mortgage instead, you couldn't use an IRRRL.

In addition to these examples, there are other situations as well where an IRRRL isn't your best choice. That's why it's best to get a personal recommendation from an experience, honest lender to see if an IRRRL is right for you.

At Low VA Rates, we always have your best interest at heart, and we will never recommend a loan that won't improve your situation. So reach out and give us a call at (866) 569-8272. We're here when you need us, even if it means not closing a deal until it's the right time for you.

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