VA Streamline Refinance (VA IRRRL): What is it And How Does it Work?

Refinancing can help you pay off debt or save some cash. If you already have a VA loan you can use VA streamline refinance and lower the interest rate.

Unlike cash-out refinance and conventional refinancing options, you require minimal documentation and no home appraisal.

Though they are more lenient than other loan types, there are still eligibility criteria. However, if you looking to get lower monthly payments you should try out for a VA IRRRL.

What is a VA IRRRL?

VA IRRRL stands for Veterans Affairs Interest Rate Reduction Refinance Loan. It is also known as VA streamline refinance for its straightforward process.

It is available only for those who currently have a VA loan. The primary goal of a VA IRRRL is to lower the interest rate on an existing VA loan.

You don’t need a new Certificate of Eligibility (COE) or a property appraisal.

How Does a VA Streamline Refinance Work?

A VA streamline refinance is designed for veterans or active-duty military members with existing VA loan debt.

It works differently from other refinance processes. For instance, for VA streamline refinance you do not need to meet a minimum VA credit score or undergo a home appraisal.

A VA streamline refinance only works if you get immediate benefits like lower monthly payments or lower interest rates. If does not directly relate to your financial situation, like a conflict with your current mortgage lender, the refinance might not get approved.

VA IRRRL Program Pros and Cons

A VA IRRRL streamline refinance is easier than getting a VA loan. Here are some pros and cons of getting a refinance.

✅ Pros

• Lower Interest Rate: You can save money by lowering your interest rate. You can also lower your monthly mortgage payments and pay less interest over the life of the loan.
• Lower Funding Fee: The funding fee is typically lower than what you’d pay for a regular VA loan. This can save you cash upfront and lower your overall loan costs.
• Potential Change in Mortgage Structure: With a VA loan refinance, you may have the option to change the structure of your mortgage. For example, you could switch from an adjustable-rate mortgage to a fixed-rate mortgage, which means more stability in your monthly payments and a better financial future.

❌ Cons

• You Shouldn’t Have Any Outstanding Mortgage Payments: You must have paid at least six of your existing VA loan payments on time. If you’re behind on your payments, you won’t be eligible for the program.
• It’s Only Applicable on the Same Property: You can only refinance your current property VA loan, which you have occupied as your primary residence at some point. If you want to refinance a different property, you’ll need to apply for a different type of loan.
• You Have to Pay Closing Costs: While you can roll the closing costs into your loan amount with a VA IRRRL, you’ll still need to pay them eventually. This can add to the overall cost of your refinance and may make it less attractive if you’re looking to save money.
• Your Overall Mortgage Time Will Increase: When you refinance with a VA IRRRL, you’ll be extending the life of your loan. This means you’ll be paying interest for a more extended period of time, which can increase the overall cost of your mortgage.

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Who is Eligible For a VA IRRRL Refinance?

To be eligible for a VA IRRRL (Interest Rate Reduction Refinance Loan) Streamline Refinance, you must meet the following criteria:

• You Must Have an Existing VA Loan: A VA IRRRL is only available to borrowers who currently have a VA loan.
• There Should be No Pending Mortgage Payments: You must be up-to-date on your existing VA loan payments and have made at least six consecutive monthly payments.
• It Must Have Been Your Primary Residence: The property being refinanced must have been your primary residence at some point.
• You Must Meet Lender Credit Requirements: Your lender will review your credit score and history to determine your eligibility for the program.

How To Apply For an IRRRL VA Loan?

Here are the 5 easy steps to apply for a VA IRRRL streamline refinance:

1. Determine Your Eligibility

You must have the following to qualify for a VA IRRRL:

• Have an existing VA loan
• No pending mortgage payments
• Occupied the property as your primary residence at some point

If you meet these requirements you can apply for a VA IRRRL.

2. Find a Lender

Not all lenders offer VA IRRRLs, so you’ll need to find one that does. You can search for VA-approved lenders on the VA website, compare mortgage rates or ask for recommendations from friends or family members who have used the program.

3. Gather Documentation

Your lender will require certain documentation to process your application, including proof of income, a copy of your current mortgage statement, and your Certificate of Eligibility (COE). Make sure you have all the necessary documentation before you apply.

4. Submit Your Application

Once you’ve found a lender and gathered your documentation, you can submit your application.

The lender will review your application and let you know if you’re approved for the program.

5. Close on Your Loan

If you’re approved for a refinance VA loan, you’ll need to close on the loan. This involves signing the necessary paperwork and paying any closing costs associated with the refinance.

You may be able to roll the closing costs into your loan amount, but you’ll still need to pay them eventually.

When Should You Consider a VA IRRRL Loan?

A VA streamline refinance is a great option if you want to lower your interest rates. It is easier and faster compared to a traditional refinance.

When you switch from an adjustable-rate mortgage to a fixed-rate mortgage, there is more stability and predictability in your monthly mortgage payment.

You should consider a VA IRRRL loan when you want to reduce overall mortgage costs.

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