For years, the U.S. Department of Veterans Affairs has been providing U.S. veterans countless of benefits in return for bravely serving the country.
This includes low-cost home loan programs that have been helping eligible veterans buy a home since it was introduced toward the end of World War II. Today, there are a number of purchase and refinance mortgages available from the VA.
When it comes to refinancing, the VA has one simple yet powerful refinancing program that eligible veterans have been taking advantage of for quite a while now.
It’s called the VA Interest Rate Reduction Refinance Loan (IRRRL) or also known as the VA Streamline Refinance. Let’s revisit everything there is to know about this program.
What is the VA Streamline Refinance or IRRRL?
Eligible veterans seek to refinance for three main reasons: (1) getting a new mortgage with a lower interest rate, (2) decreasing your monthly mortgage payment, and (3) refinance an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
There are a few things that set the VA Streamline Refinance apart from other refinancing programs.
The VA IRRRL program can be done without any out-of-pocket costs by adding all the costs in the new loan. The new loan can be at an interest rate that’s high enough that would enable the lender to pay these costs.
This program only enables refinancing from a VA to VA loan. Any VA lender may process the VA Streamline Refinance or VA IRRRL application but eligible veterans should consult different lenders because terms may vary from each one.
For borrowers that are thinking about refinancing their existing VA adjustable-rate mortgage to a fixed-rate one, keep in mind that the rates will possibly increase.
Veterans will not receive any cash-out from this refinancing program.
VA Funding Fee
VA home loans come with the required funding fee. It’s a one-time fee that an eligible veteran should pay at closing.
The VA Streamline Refinance Program is no exception to this requirement. It’s a percentage of the loan amount which would vary to either the type of loan, the borrower’s military category, if it’s your first VA home loan or not, and if you decide to make a down payment.
However, there are certain exemptions to the VA funding fee. According to the VA website, the borrowers don’t have to pay if the:
- Veteran receiving VA compensation for a service-connected disability, OR
- Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay, OR
- Surviving spouse of a Veteran who died in service or from a service-connected disability.
VA IRRRL Eligibility
The VA IRRRL program can only be acceptable if the eligible borrower has used his/her loan eligibility.
There are specific eligibility requirements that the VA has listed for those who choose to refinance their VA home loan through the VA Streamline Refinance. Here are the following:
- A Certificate of Eligibility (COE) is not required. If you have your Certificate of Eligibility, take it to the lender to show the prior use of your entitlement.
- No loan other than the existing VA loan may be paid from the proceeds of an IRRRL. If you have a second mortgage, the holder must agree to subordinate that lien so that your new VA loan will be a first mortgage.
- You may have used your entitlement by obtaining a VA loan when you bought your house, or by substituting your eligibility for that of the seller, if you assumed the loan.
- The occupancy requirement for an IRRRL is different from other VA loans. For an IRRRL you need only certify that you previously occupied the home.
One of the best refinancing option for veterans
As borrowers, you need to determine whether refinancing is the best option for you. Deciding to refinance an existing mortgage is something that needs to be thought of very carefully.
For veterans who wish to refinance, the VA IRRRL is worth looking into. It’s specially designed for eligible veterans who wish to come up with better mortgage terms than their current one.This way to great refinancing options.