The Department of Veterans Affairs ( VA) is the United States Government’s division that ultimately deals with veterans’ benefits, healthcare and even memorial and burial assistance.
One of the Veterans Affairs programs is the IRRRL. This stands for the Interest Rate Reduction Refinance Loan. This refinance program is offered to qualified veterans in order to lower the interest rate of an existing VA home loan.
By reducing the interest rate, the veteran can benefit from a much lower monthly mortgage payment.
The IRRRL is a streamlined refinance program, meaning the loan process is shorter, faster and simpler. This is also why the IRRRL is called the ‘VA Streamline Refinance’.
How ‘simple’ is simple with the IRRRL?
Basically, the lengthy (not to mention, costly) home appraisal requirement is no longer required. Also, there is no longer a need to ask for another Certificate of Eligibility (COE) to be eligible to refinance through an IRRRL. The existing COE can be used to prove to a lender that you have used your entitlement before.
Furthermore, the VA does not require a credit underwriting when a veteran applies for an IRRRL. However, since the VA only guarantees the loan and a lender originates it, the lender may set their own credit requirement.
A COE is not necessary, and an appraisal and credit verification is not a prerequisite. Then, what factors affect your IRRRL eligibility? Let us find out.
The VA IRRRL Eligibility Requirements
Here are the eligibility requirements a VA borrower needs to meet to be approved of a VA IRRRL.
- Your house must be under a VA loan. This is why it is also called the ‘VA to VA’ refinancing.
- You should not have any late mortgage payments within the last 12 months.
- You must provide a proof or certify that you have previously lived in the property lived in the property. It does not have to be your primary home in the present time.
- The IRRRL must also be beneficial to you, such as reducing the interest rate or the monthly mortgage payment.
Your payment history matters when applying for an IRRRL. The VA wants to know if you have been punctual in paying your mortgage payments. If you have been paying your dues on time, it is easier for you to to be approved for an IRRRL.
It completely makes sense. If you were able to pay your mortgage on time recently, you may very well afford to pay a new one with a much lower monthly payment. The VA just want to make sure that refinancing will not make things worse. Note that there may be other costs you need to pay when you refinance.
While the VA has already established their set of eligibility requirements, you may still have to meet those which the lender has set.
Because a lender funds the loan, they may have overlay requirements. The least they can impose is that of which the VA has set. They may take a look at your credit report to see if there had been any credit issues in the past. This is why it is important that you shop for lenders. Each lender has different requirements to determine your IRRRL eligibility. And, not all have overlay requirements. Shopping will help you to find one whose criteria works for you.