VA Streamline Refinance Loan
VA IRRRL Mortgage Loan
A VA streamline refinance, also known as an IRRRL, short for an "interest rate reduction refinance loan". It is considered one of the easiest loans with minimal qualifications for military service members and veterans.
An IRRRL doesn't require an appraisal or go through the typical VA lender underwriting process. That saves a lot of time, paperwork and fees. If the lender charges discount points an appraisal is required. If discount points are not charged an appraisal is not required.
Refinance from an adjustable-rate loan to a fixed-rate loan.
If your VA Loan is an Adjustable Rate Mortgage (ARM), you probably paying the lowest rate now but since the Federal Reserve is at zero interest rate, in the future your rate will go up which will cause your monthly payment to go up. In this situation, refinancing your mortgage to a lower fixed interest rate soon could greatly benefit you if you will stay in the home a long time.
Qualifying for a VA Loan
Like a VA purchase loan, you always need to meet VA eligibility requirements and work with a Department of Veterans Affairs approved lender. The VA rules make it mandatory that a refinance must bring about a net tangible benefit. That means the proposed refinance must reduce your monthly payment or lower your interest rate.
However, an exception allowed by the VA is when you're refinancing from an ARM to a fixed-rate loan where your mortgage interest rate goes up on a refinance but now your payment is fixed.
An additional requirement is your payment must be current when you apply for a VA Streamline refinance loan.
Current VA IRRRL Rates
VA IRRRL rates change every day according to market conditions so it's recommended you apply online in 2 minutes with a VA approved lender to find the best VA IRRRL rates.
Interest rates and closing costs will be different from one lender to the next, and some lenders "overlay" certain loan requirements that others don't. An overlay is additional qualifying condition such as a minimum credit score of 620 or even lowering the maximum allowed LTV. Some lenders have done that in the wake of Covid-19.
Like most mortgage refinances, your closing costs for your IRRRL can be rolled into the new loan balance or priced into your interest rate. This include a 0.5 percent funding fee on a Streamline which is much lower than if you were purchasing a home with a VA loan. This is a cost homeowners can finance into the new loan.
How Long Does it Take?
Sometimes within 10 – 15 days. That's much better in comparison to the 30-45 day average for new purchase loans and standard refinances.
VA Streamline Refinance Pros and Cons
- Save money by lowering your interest rate
- In most cases an appraisal is not required
- No employment or income verification is required
- No minimum FICO credit score
- Quick closing times
- Option to postpone two months of mortgage payments
- Option for no cash due at closing
- Lack of net tangible benefit
- No cash back allowed, if you would like to access your home equity please look into the VA cash out refinance.
- As with any loan there are closing costs