The VA IRRRL program allows you to refinance your VA loan without verifying the typical items on a refinance. They base your approval on your mortgage payment history over the last 12 months. What if you have a late payment or two in that time? Are you out of luck?
Luckily, the answer is ‘no.’ You can still qualify for the IRRRL program, but with approval – VA approval that is. The lender must secure the approval from the VA by providing the necessary proof below.
Proof of the Reason for the Late Payment(s)
First, you need a reason that you made a late mortgage payment. Did you lose your job? Maybe you fell ill or were injured? You need a reason and it can’t be that you shopped too much. You must be able to prove it was an unpreventable occurrence.
Proving the reason isn’t enough, though. You must also prove that you corrected the problem. For example, if you lost your job due to your company downsizing, you must prove you secured a new job. If you had to take a few months off because you fell ill, you must prove that you are back and making an income again. Whatever the logical solution to the problem is, you must show the lender that it happened. You’ll need paper proof – not just a verbal statement that you fixed everything too.
In addition to your reason for the delinquency, you’ll need to send the VA the following documents:
- Personal identifying information for everyone on the VA loan
- The VA loan number
- The information on the proposed new lender
- Statement of intent to refinance signed by you
- Statement proving owner occupancy of the home
- Certificate of Entitlement
- Credit report
- Most recent paystub
- Employer information for verification of employment
When the VA receives all of this information, they will determine if your delinquent loan is eligible for the VA IRRRL program.
What is the Benefit?
Something you really want to focus on when you apply for the VA IRRRL is the benefit. What do you get out of refinancing? Will you have a lower payment? Are you just trying to bring your account current? These are the things the lender and the VA need to know.
The net tangible benefit is the basis of the approval, outside of the loan payment history. Since you have a late payment or two, you really need a good benefit for the loan. A lower payment combined with a small recapture period is the perfect combination for the VA. They will see that it won’t take long for you to start seeing the savings of the new loan after you pay off the closing costs with the savings. This is the recapture period – how long it takes to see the benefit of the refinance after paying the closing costs.
Qualifying for the VA IRRRL
Qualifying for the VA IRRRL outside of your mortgage payment history is rather simple. You don’t need a new appraisal or proof of your current liabilities. The lender will not calculate a debt ratio or determine how much you have in reserves. Essentially, they want to make sure you can afford the new loan, which if its payment is lower than your current loan, you should be able to afford it.
Again, a lot relies on your reason for your late payment. If you just got financially irresponsible, a lender and the VA will not be very likely to get you a new loan. A new lender will not want to take the risk and the VA will not be reassured that you have corrected the problem.
If you have a problem that has a solution and is a one-time occurrence, though, the VA may provide you with an exception to the rule. It’s on a case-by-case basis, though. There isn’t a one-size-fits-all solution. The best thing you can do is make your compensating factors as attractive as possible and make sure you solidify your reason for the late payments.