If you took your VA loan out a few years ago, you stand to save a lot of money by refinancing right now. VA rates have continually been lower than even conventional rates, making it a great way to save money every month. If you already have a VA mortgage, refinancing could be very simple for you – the lender will not even need to perform a credit check. The main premise behind the VA refinance, known as the IRRRL or Interest Rate Reduction Refinancing Loan, is to provide you with a lower interest rate – that is all the lender is concerned about.
Pulling your Credit
Does this mean the lender for your IRRRL will not pull your credit? No, they still need to pull it, but they are not doing so in order to look at your credit score. They are strictly concerned with the payment history on your current mortgage, which must be a VA mortgage. If you can show that you have made on-time payments for the last 12 months on your mortgage, then the VA’s requirement is satisfied. In some cases, lenders throw their own requirements on top of what the VA requires, which means that they might want a certain credit score, but every lender is different so you could shop around if you did not meet the criteria of one lender but did meet the VA’s requirements.
Everything Else Remain the Same
Aside from your credit report, according to the VA, the remaining documents to help you qualify for the loan can be taken from your original VA loan. This means that the lender is not required to verify your employment, income, or require a new appraisal. All of the figures used on your original loan application will be used for the refinance as long as you made your last 12 mortgage payments on time. Nothing else will change because your payment will be lower, your debt ratio will automatically be lower and in the eyes of the VA, you are already making your higher payments on time, so you should have no problem making the lower payments.
When you first obtained your VA loan, you had to prove that it was going to be your primary residence. With the IRRRL, however, you do not have to live in the home. If the original primary residence is now a second home or even an investment home, you can still refinance it. You are not using your entitlement for a VA loan again since you are refinancing the first mortgage; so in essence, you are reusing your original entitlement.
The IRRRL for your VA loan is a great way to reduce your mortgage payment, allowing you to gain more equity in your home faster and to save money every month. The main idea behind the program is to reduce your monthly payment, which is why many lenders are very lenient with their requirements to obtain the loan. If you find one lender with difficult overlays that you cannot qualify for, apply with another VA approved lender as each one will have their own requirements, enabling you to lower your payment on your VA mortgage.