The last two quarters of 2016 reported a surge in the VA loan sector, with refinances making up the majority of the increase – a growth that is attributed to the popularizing of the loan program and the low interest rates created by the Brexit ripple.
In the third quarter of 2016, the number of VA loans made up 8.8 percent of all mortgages closed. The record was reported to be the highest in a decade. The last quarter of the year registered a drop but was still a good 23 percent up compared to the previous year.
This increase in VA loan cases is corresponded by a drop in FHA loans which decreased by 21 percent from the third to the fourth quarters of the year.
A Refi Season
In 2015, the recorded refi cases guaranteed by the Veterans Affairs was less than 310,000 while in 2016, the number rose to 350,000. The average loan amount also increased to $253,243 from 2015’s $243,178. This can be accounted to the corresponding rise in home prices.
The leading refi program preferred by the homeowners was the well-known streamline program or the Interest Rate Reduction Refinance Loan (IRRRL) which made up 215,000 of the VA loans. During the previous year, the IRRRL record was only at 195,000.
What is IRRRL?
The Interest Rate Reduction Refinance Loan is designed to aid veterans in lowering their interest rates, and thereby also lowering their monthly mortgage payments.
Also known as the VA Streamline Refinance program, it cuts through the traditional refi process for faster loan processing and approval. The borrower is freed from having to resubmit his or her income documents, W2 forms, etc. No appraisal is required, and the costs of closing can also be wrapped into the loan.
The basic objective of an IRRRL: for the resulting loan to lower the borrower’s monthly payments, except for when the refi is from ARM to a fixed-rate, the borrower refinanced into a shorter loan term, or the loan is used to make energy-efficient improvements to the home, all of which are still beneficial to the borrower’s end.
In today’s market of rising mortgage interest rates, will this VA refi boomlet sustain?
It is likely that refinances continue as veteran homeowners who were not able to refinance last year strive to take advantage of historic low rates before the new highs kick in. But we can only speculate until the 2017 numbers enter the records.
If you are interested in a VA refi yourself, talk with a lender today to get your refi process rolling before it’s too late.