Your 2020 Guide to VA IRRRL Streamline Refinances

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If you bought your home with a VA loan, you may be eligible to lower your rate with a VA streamline refinance. These refinances are also called Interest Rate Reduction Refinance Loans (IRRRLs). Streamline refinances have less paperwork and faster closings, and they can be a great way to take advantage of today’s historically low VA mortgage rates.

Benefits of VA IRRRL Streamline Refinancing

Lower interest rates. The primary benefit of VA streamline refinances is they make it simpler to lower the rate on your VA loan, compared to other kinds of home loans.

Lower monthly payments. Lowering your interest rate can also lower the amount you pay each month on your mortgage bill.

No home appraisals. You won’t need to pay for a new appraisal to estimate the current market value of your home.

No income verification. You don’t need to give your lender documents that show your current income.

Easier credit qualification. You can get approved for VA streamline refinancing with lower credit scores compared to other loans.

Low Funding Fee. The current funding fee for IRRRL refinancing is just 0.5% of the loan amount. If you are a disabled veteran or surviving spouse, you may be exempt from paying this fee.

Add closing costs to your loan amount. You can roll many closing costs, including the funding fee, into your loan balance.

Faster closings. Because streamline refinancing has less paperwork, you can often close your new loan faster, compared to other kinds of refinancing.

When you are comparing VA IRRRL refinancing offers from different lenders, be sure to look at the annual percentage rates (APR) as well as the interest rates. APR includes interest charges, plus other costs and fees you might have to pay. This makes it easier to understand the full cost of a mortgage. Also keep in mind that, by refinancing, the total finance charges you pay may be higher over the life of the loan.

It is often easier to meet the requirements for VA streamline refinances compared to other mortgages, which is why IRRRLs are called “simpler” refinances. There are still requirements you have to meet, however.

Requirements of VA IRRRL Streamline Refinancing

Refinancing must make financial sense. VA rules require that refinancing make financial sense for you. (They call this having a “net tangible benefit.”) For many loans, you can meet this rule if you reduce your interest rate by at least 0.5%. Lowering your monthly payment or switching to a fixed-rate mortgage can also qualify.

You must have a VA loan. To be eligible for streamline refinancing, you need to replace an existing VA loan with a new VA loan.

Be current on your payments. To be eligible, you need to be up-to-date on your VA mortgage payments.

Have the VA loan for six months. VA rules officially define this eligibility requirement by saying the due date of the first monthly payment of the VA loan you are refinancing must be 210 days or more prior to the closing date of your new loan refinance. This works out to roughly six months for many borrowers. You also need to have made six consecutive monthly payments on the VA loan you are refinancing.

Take no cash out. You can’t borrow money from your home equity with VA IRRRLs.

Certify you’ve lived in the house. For VA IRRRLs, you don’t need to currently live in the home you are refinancing. You just need to certify you lived in the house in the past.

You don’t need a new Certificate of Eligibility. Lenders may ask for a copy of the certificate you used when you bought your home, however. IRRRL refinances have flexible maximum loan amounts. You can refinance all of your existing principal mortgage balance, plus those closing costs the VA allows you to roll into your new loan.

Closing Costs for VA IRRRL Streamline Refinances

IRRRL closings costs vary from lender to lender. You may have to pay “discount points” to get a certain interest rate. (One point is equal to 1% of the loan amount.) You may have to pay origination fees, which are also called “lender” fees.

Additionally, there can be government recording fees, a funding fee, and other costs. The VA allows you to add many closing costs to your loan balance, including up to two discount points and the VA funding fee.

Your loan disclosure documents will explain what closing costs are required and how much you will need to pay. Make sure you understand these costs and ask your lender when you have questions.

Take the Next Step

If you're ready to move forward, or just want more information, the first step is to get no-obligation rate quotes.

 

1. Inside Mortgage Finance, 1Q2020

 

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