If you currently have a VA loan, you are eligible to refinance for very little money and it will not take a lot of time. In fact, it is one of the easiest programs out there, enabling you to get a lower interest rate and ultimately save money every month. If you have held back from refinancing because you know that refinancing is usually expensive and not always worth it, you need to learn the truth about the VA IRRRL program.
VA IRRRL Does not Cost Much
A refinance that does not cost much seems too good to be true, doesn’t it? It happens, though! The VA IRRRL does not have a lot of closing costs and the costs that are incurred can typically be rolled right into the mortgage. If you do not want to pay closing costs at all, there is usually an option for the lender to pay the costs for you as well. All that you have to do is pay a slightly higher interest rate, which usually equals about ¼ of a percent. The best way to determine the right choice for you is to determine how long you plan on staying in the home – if you are only there for a short while, letting the lender pay the costs and taking the slightly higher interest rate might make more sense. If this is your long-term home, however, wrapping the closing costs into your loan might make the most sense. All you have to do is figure out how long it would take you to pay those closing costs back and then start reaping the savings in order to determine the magical length of time that is right for you.
You will save money
The only way to get a VA IRRRL is to lower your payment. If your payment does not decrease and you are refinancing from a fixed loan into another fixed loan, you will not get approved. If you get approved, you are saving money. How much money you save depends on the new interest rate you obtain and the amount of the closing costs/funding fee you wrap into the loan. The only time a payment might not decrease is if you refinance from a risky loan type, such as an adjustable rate loan into a fixed rate loan. If that payment increases, it is okay because the loan program is less risky when you go into a fixed rate loan.
There is not a lot of work to be done
Depending on the lender you use, you might be able to get through the IRRRL process fairly quickly. Every lender has different requirements for this program, but according to the VA, none of the following are needed:
- Credit report
- Employment verification
- Income verification
- Certificate of Entitlement
Everything that was used for your original loan program can be reused to qualify you for the VA IRRRL. The only difference is that the VA will need verification that your last 12 months’ worth of housing payments was made on time. If you have one 30-day late in that time you can still get approved, but beyond that, you would have to wait until another 12 months passed. The income, employment, appraised value, and credit score can all be used from your original loan. Of course, some lenders prefer that all information is updated, so you might have to shop around with various lenders until you find one that does not need to verify everything all over again.
It gets done quickly
Most VA IRRRL programs close fairly quickly because of the lack of paperwork and actual work that needs to be done. Lenders are able to wrap this loan program up fairly quickly, enabling you to start saving money right away. This will depend on the amount of verification the lender needs in order to process your loan, however.
The VA IRRRL program is a great way to lower your interest rate and save money. The largest downfall to the program is the funding fee that you must pay again, but if you stay in the home long enough, you can break even rather quickly and start to save a significant amount of money from there on out. Remember to shop with several lenders before deciding on one in order to get the most out of this program.