The VA IRRRL offers the ability to refinance with very little verification. As long as you can prove that you pay your current mortgage on time, you are in good shape to get a new mortgage with very little verification.
The IRRRL stands for Interest Rate Reduction Refinance Loan. In other words, the VA wants to help you secure a lower interest rate on your VA loan. This will make it easier to afford and quicker to pay off. A lower interest rate isn’t the only thing they allow, though. You can use this program to get out of an adjustable rate loan or shorten the current term of your loan.
In order to speed up the process, check out the tips below.
Make Sure There is a Benefit
Because the VA only requires two things in order for you to use the VA IRRRL program, you want to maximize those two items, one of which is the net tangible benefit. If you make sure that your benefit is as clear as possible, you have a better chance of fast approval.
Here’s an example:
If you can lower your payment $20, that’s not much. A lender will be hesitant to approve your loan and will likely require more documentation. What will that $20 per month really do for you? Is it really worth paying closing costs for such a small savings?
Now, on the other hand, if you could save $150, the lender might have a much quicker response. $150 savings per year is a $1,800 per year savings, which can make refinancing well worth it.
The more obvious your savings, the quicker the lender will be to approve your request.
Have a Timely Mortgage Payment History
The VA prefers it if you have no late payments on your VA loan in the last 12 months. They do offer a one-time exception for one 30-day late payment, but that doesn’t mean you should use it. If there is a late payment during that time, it gives lenders another reason to contemplate your request.
Some lenders may require that they pull your credit report if there is a late payment so they can see what else you paid late. The last thing they want to do is lend you money if you cannot keep up with the payments. Other lenders may even want to take it a step further and verify your income or employment just to make sure that you truly can make the payments.
Having that timely mortgage payment history could save you a lot of time and headaches during the refinance process.
Make Sure Your Payment Doesn’t Increase More than 20%
Sometimes a payment can increase with the VA IRRRL and that’s okay. The VA allows this situation as long as it doesn’t increase more than 20% more than your current payment. A couple of examples when your payment might increase are below:
- You refinance out an ARM and into a fixed rate loan – The ARM loan probably came with a teaser rate that was much lower than fixed rates. If you refinance into the fixed rate, you may take a higher rate than you had, but you lower the risk of default on your loan because a fixed rate doesn’t adjust.
- You refinance into a shorter term – The VA allows borrowers to shorten their loan term with the VA IRRRL, but your payment could go up here too. If you have less time to pay off the loan, you have to make larger payments.
If your payment goes up any more than 20% in either of these situations, you may have to provide proof that you can afford the higher payment. This could delay the process with the lender, as they have to ensure beyond a reasonable doubt that you can afford the loan.
Ask the Lender About Their Turnaround Time
You are not required to use one specific lender when you apply for a VA IRRRL. You are free to use any VA-approved lender. This means that you should shop around. Not only should you find the lender that has the lowest interest rates or closing fees, but also the one with the best turnaround time.
It’s a valid question to ask lenders how long it will take them to process your loan. The actual time it takes depends on their workload at the time and the complexity of your loan. Obviously, you can handle the complexity of your loan by managing your qualifying factors, but you can’t control how many loans are ahead of you. Knowing ahead of time the turnaround time can help you decide if this is the right lender for you.
Respond Quickly to the Lender
Finally, you play a role in how quickly your VA IRRRL closes. If you don’t respond to the lender’s request promptly, you could delay things. Make sure you have clear communication with the lender and that you provide the loan officer with a good number to reach you.
If you don’t hear from the lender after a day or two, it’s okay to follow up again. Just let the lender now that you want to get this process rolling as fast as you can. You can inquire if the lender needs anything from you at this point or if there is anything, you can do to get the process going faster.
Without proper communication, your loan could sit in the pipeline unprocessed for a while.
These five tips will help you get your VA IRRRL refinance closed as quickly as possible. This will allow you to reap the savings you have coming your way with the VA IRRRL program.