VA Streamline Refinance (IRRRL)

What is it and how does it work?

What is a VA IRRRL?

A VA IRRRL is also referred to as a VA Streamline, and the terms are often used interchangeably. Lenders use the term “streamline” to imply that the IRRRL process is simpler and faster than other types of refinancing options.

This is also a less expensive refinance process.


You must have an existing VA loan to undergo a VA Streamline.

A VA Streamline refinance can allow you switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, lower your monthly interest rate or change your repayment term.
 
NOTE: If you wish to take out cash from your home equity, a full VA cash-out refinance process will be required.


How does a VA Streamline Refinance work?

With a streamlined process, there is often no new appraisal and underwriting is often simplified. Your lender may require a minimum credit score and employment verification, but the VA does not. As long as you are up to date on your mortgage payments, you should be approved for a streamline loan.

 

A new title search and lender’s title insurance policy will be required.

 

The streamlined process moves quickly, and the closing costs can typically be rolled into the new loan.

 

The VA will only allow you to take advantage of a VA Streamline refinance if the new terms provide you with an immediate financial benefit, such as a lower interest rate or a lower monthly payment.

VA IRRRL Advantages and Disadvantages

If you secure an IRRRL, you will likely be securing one of the lowest interest rates in the market. It is advisable to also understand the advantages and disadvantages when it comes to securing a VA IRRRL.

VA IRRRL Streamline Refinance Pros

The VA Streamline refinance program offers many benefits over other refinance options.


Lower Interest Rate

The most common reason why one may want to refinance their current VA loans is to try and secure a lower interest rate.
The VA strongly prefers that borrowers seeking a VA IRRRL secure a lower interest rate than their current mortgage loan has, unless the loan they are refinancing is an ARM.

 

Lower Monthly Payments

With a VA Streamline refinance, monthly payments often decrease.
Lower monthly payments may result from an extended term on the loan, which allows more time to pay on your mortgage. A lower interest rate could also result in a lower monthly payment if the loan term is the same as the current mortgage.
 
Lower Funding Fee

The up-front funding fee can either be paid at closing, offset with a lender-paid credit, or rolled into the new loan amount.

The VA Streamline funding fee is 0.5% of the loan amount in all circumstances.


Potential Change in Mortgage Structure

As a reminder, a VA Streamline refinance could allow you to change from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. ARMs change over time, depending on market conditions. Fixed-rate mortgages lock in a single interest rate until you pay off your loan.

VA IRRRL Streamline Refinance Cons

There are some costs and other requirements to a VA Streamline to consider.

 

You must be current on your mortgage

You must be current on your mortgage payments. This means that you cannot be more than 30 days late on a payment in the last 6 or 12 months depending on how you qualify.

 

It is only applicable to your current property

The streamline refinance is only applicable to the loan on your current home.
Meaning that the refinance must be for the property that you purchased with the VA loan.

 

Closing costs

Besides the standard closing costs, there will also be the VA IRRRL funding fee.

Borrowers may choose to include these costs into their new loan, but they will be paying interest on these costs over the term of the loan.

 

Mortgage term

VA refinances are flexible, and there’s no set rule that says you must extend your mortgage term. Depending on the situation, you may have a longer term – therefore taking a longer time to pay off your mortgage. This could be a negative for some borrowers.

 

Seasoning requirement

It’s important to note that you must wait 270 days from the closing of your original mortgage to apply for the VA Streamline refinance. You must also have made at least six consecutive monthly payments on your loan, and there must be 210 days between your first mortgage payment and the closing on the VA Streamline refinance.

  • Who is eligible for a VA IRRRL Refinance?

    To be eligible for a VA IRRRL, you must meet the following requirements.


    Refinance your current VA loan only

    While a VA IRRRL allows you to include your closing costs into your new mortgage, other liens on the property – including delinquent home equity loans, mechanics liens or homeowner association (HOA) fees, cannot be included. 


    Must have met any owner occupancy requirements

    The VA may allow qualification for a Streamline refinance for a rental home, if you previously lived in the residence. If you are trying to refinance your investment property, you must prove that you resided in the home as your primary residence at some point in the past and can meet the VA owner occupancy requirement.


    Proof of residence may include bank statements, utility bills, other bills or pay stubs, with your name and address printed on them.


    Must also benefit financially from the refinance

    Your lender will have to certify that you’re benefiting financially from refinancing your VA loan. That means that the savings you are getting – either through a lower interest rate or a more manageable monthly payment – justifies the closing costs that you will pay. This requirement protects VA borrowers from unscrupulous lenders who make their money through various mortgage scams.

  • Who should consider a VA IRRRL Loan?

    If you want to lower your mortgage payments, or you currently have an ARM and want to switch to a new ARM or a fixed-rate mortgage, you may want to see if an IRRRL loan can save you time and money.


    Mortgages with adjustable rates often see higher interest rates over time. You can often save more money in the long term by refinancing an ARM, even if you initially take a higher interest rate when you switch from an ARM to a fixed-rate mortgage.


    A VA Streamline can do multiple things:

    • Lower your rate
    • Give you a more manageable payment
    • Extend the term of your mortgage

    At Aiello & Associates – we will work with you to find the solution that’s right for you and your family’s unique financial situation.


    You must have a financial benefit to qualify for a VA Streamline.


    Each lender may have their own terms for what qualifies as a tangible net benefit, and the VA has certain minimum standards, so you should ensure you’re able to meet these net benefits when you apply. Your application can be denied because of a failure to prove a tangible net benefit.

How to apply for a VA IRRRL Loan?

Applying for a VA Streamline refinance only requires a few steps. You can even apply online.

STEP 1: Make Sure You Qualify

  • Review the above requirements to see if you may qualify for a VA Streamline.
  • Review your finances and determine whether you are able to make payments at your current interest rate.

STEP 2: Get Your Documents Ready

One of the best aspects of the streamlined process is the minimal paperwork required.
Throughout the process – from application to closing – you will need to complete and submit, or sign the following documents:

 

  • The lender cover letter
  • VA Form 26-0286, VA Loan Summary Sheet
  • The borrower’s Certificate of Eligibility, or a VA Form 26-1880 to request a duplicate COE
  • Funding fee receipt
  • Borrower must sign the lender’s statement of tangible net benefit
  • VA Form 26-8923, IRRRL worksheet
  • VA Form 26-1820, Report, and certification of loan disbursement
  • VA Form 26-8937, Verification of VA benefits
  • HUD-1, Settlement Statement
  • VA Form 26-0503, Federal Collection Policy Notice
  • Lender’s certification that borrower of the current mortgage is up-to-date with their payments
  • Documentation of energy efficient upgrades, if applicable

STEP 3: Contact a Home Loan Expert

If you decide that a VA Streamline refinance is right for you – It’s advisable to speak to an expert.
 
Aiello & Associates is here to help you!

We will go over your current mortgage loan and your specific financial needs to see if the VA Streamline refinance will be beneficial for you. If we find that you qualify for this refinance, we will assist you throughout the refinance process.


If for some reason you do not qualify, we can explore other options that may be available.

VA IRRRL FAQs

  • Can I get money back from a VA IRRRL refinance?

    Not usually. However, there is one other exception. You can get reimbursed for up to $6,000 of the cost of energy home improvements completed within 90 days before closing. In some rare circumstances, the VA may approve other reimbursements.

  • How much does the VA IRRRL cost?

    The cost will be lower than the standard VA refinance. 

    There will be a flat underwriting fee of $450, an origination fee of 1% of the loan amount, and a VA Funding fee of 0.5% of the loan amount and other 3rd party fees such as: title, escrow, recording fees, etc. These closing costs can be included into the new loan.

  • Can I buy discount points to lower my interest rate?

    Yes. The VA allows their borrowers to buy up to 2 discount points to reduce their interest payments.

  • Can I use the VA IRRRL for an investment property?

    In general, you cannot. The VA guidelines state that you must live in the home for at least 1 year.


    If you purchased a property with a VA loan and met that requirement, and have since moved into a different home, you can refinance the home that was once your primary residence but is now an investment property.

Ready to apply for a VA IRRRL?

Or contact us to discuss further prior to applying: (818) 772-1811