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- A VA Interest Rate Reduction Refinance Loan is for refinancing from one VA mortgage into another.
- You don't need to go through an appraisal or show your credit score or debt-to-income ratio.
- If you've gained equity in your home, a conventional or VA cash-out refinance may be better.
When you refinance your mortgage, the number of options can feel overwhelming. But the best choice for many VA loan borrowers who want to refinance is clear: a VA IRRRL.
Find out if you qualify for a VA IRRRL and if it's the right fit for your refinancing goals.
What is a VA IRRRL?
VA IRRRLs are a refinance option available to VA loan borrowers. Here's what you need to know about these refinance options.
Definition
A VA Interest Rate Reduction Refinance Loan (IRRRL) is a type of refinance for people who already have a mortgage backed by Veterans Affairs. You refinance from one VA loan into another. It's also called a VA streamline refinance.
Purpose
The primary goal of an IRRRL is to get a lower interest rate and reduce your monthly payments. You may also change your term length or switch from an adjustable-rate mortgage to a fixed-rate mortgage.
If you want to make energy-efficient improvements to your home, such as updating the water heating or air conditioning, you can also borrow an additional $6,000 and wrap it into your new mortgage.
Streamlined process
The process is faster than with many types of refinances, because you don't need to go through an appraisal again. You also don't have to show a lender your credit score or debt-to-income ratio, so the mortgage underwriting process should go more quickly than it did with your initial VA mortgage.
Benefits of a VA IRRRL
There are many benefits of refinancing a VA loan with the IRRRL program. These include:
Lower interest rates and reduced monthly payments
Most lenders will only let you get a VA IRRRL if it would save you money. So you could lock in a better rate and/or a lower monthly payment.
Switch from an ARM to a fixed rate
If your current VA loan has an adjustable interest rate, you can use an IRRRL to get a new loan with a fixed rate. This would ensure your rate and payment can't change over time.
No appraisal or income verification
IRRRLs are a VA loan refinance with no appraisal, so you won't need to have your home appraised or pay an appraisal fee when getting one. This also means you can qualify to refinance even if your property has lost value or you haven't gained much equity in your home. You can also refinance even if your financial situation isn't as strong as when you got your initial mortgage, because you don't need to show your credit score or debt-to-income ratio this time around.
Minimal closing costs
Closing costs are minimal on VA IRRRL. And while you'll still need to pay the VA's funding fee, it's only 0.5% with a VA IRRRL (versus up to 3.3% on other VA loans).
VA IRRRL eligibility requirements
Not every active military member or veteran is eligible for a VA IRRRL. You'll need to meet the following VA streamline refinance requirements:
Have an existing VA loan
A VA IRRRL is for people who want to refinance from one VA mortgage into a new VA mortgage. You can't use it to refinance from another type of mortgage into a VA loan.
Meet occupancy requirements
The home doesn't have to be your primary residence right now, but you must have lived there at one point.
See a net tangible benefit
Lenders will typically only approve a VA IRRRL if it will help you out financially. This could mean a lower mortgage rate or monthly payment. Or you could refinance from an adjustable rate to a fixed rate, which may help you budget more effectively and make payments on time.
Adhere to loan performance rules
At least 210 days must have passed since your first mortgage payment before you can refinance with an IRRRL. You also must have made at least six months of payments.
How to apply for a VA IRRRL
If you have a VA loan and are looking for a lower rate and payment, the IRRRL program might be the right choice. Here's how to get a VA IRRRL:
Find a VA-approved lender
Only certain lenders are allowed to issue VA loans, so the first step is to choose the one you'd like to work with. Keep in mind that you don't need to refinance with the same lender you used for your original mortgage. Feel free to shop around for the VA mortgage lender offering the best interest rate and lowest fees.
Gather required documents
You will need a current Certificate of Eligibility to get a VA IRRRL. You can request this from the VA yourself or, in most cases, the lender can request it on your behalf. You will also need to submit a few VA forms and worksheets, which your lender will provide for you.
In most cases, you shouldn't need any additional documentation, like tax returns or pay stubs. These may be required in full refinances, though.
Complete the application
Next, you'll have to fill out your lender's loan application. This will require some information about your finances, income, and other personal details.
Loan closing
Last, you will pay your funding fee and close on the loan. Once you sign your paperwork, your new loan will replace your old one, and you'll start making payments to your new lender moving forward.
VA IRRRL FAQs
No, VA IRRRLs can only be used for refinancing your existing VA loan balance and getting a lower interest rate and monthly payment. If you need cash out, you'll need a VA cash-out refinance.
Yes, IRRRLs come with closing costs, but they are typically lower than with other refinance options. The VA funding fee is the main cost, but it can be financed into the loan.
The IRRRL timeline can vary by lender, but it's generally faster than other refinances. It can take anywhere from a few weeks to a few months.
