VA IRRRL Mortgage Guidelines For VA Streamline Refinance
VA IRRRL Mortgage Guidelines allow homeowners with a VA loan to refinance to a new VA loan with low mortgage rates without an appraisal, or income documents. There has been a misinterpretation of a VA guideline on VA IRRRL. In this blog, people detail what the VA interest rate reduction loan is and VA IRRRL Mortgage Guidelines. We will cover what sparked the change in the VA interest-rate reduction loan, and how do I apply for this loan product. Gustan Cho Associates have been completing VA IRRRL loans for years! Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on VA Mortgages.
What Is A VA Streamline Refinance (VA IRRRL)
A VA loan is an unbelievable mortgage product designed to help our military heroes obtain homeownership. No down payment is required to enter into a VA loan. We close many VA mortgages without any additional LENDER OVERLAYS. While the VA does not have a minimum qualifying credit score, the higher your credit score is, the better interest rate you will receive. Many of our veteran clients are working through credit issues at the time they purchased their house. Once your mortgage is reporting with a few on-time payments to the credit bureaus, you should see your credit score skyrocket
VA IRRRL Mortgage Guidelines On Waiting Period To Refinance
When a veteran enters into a VA mortgage, after making six payments and 210 days have elapsed, the veteran may apply for an interest rate reduction loan. This is an amazing loan product that allows you to refinance the current balance of your VA mortgage into a lower interest rate. You will not need to verify income like you did when you purchased your home. This program is set up through housing and urban development (HUD) and is designed to help a veteran achieve a lower overall monthly payment. When completing an interest rate reduction loan, all mortgage payments must be on time for the previous 12 months. As stated above you must make a minimum of six payments on your current VA mortgage. As long as all of those payments are on time, you are eligible to apply for a VA interest rate reduction loan.
VA Mortgage Guidelines On New Appraisal Requirements On VA IRRRL Refinance
An appraisal is not needed when you complete a VA IRRRL. The reason you do not need an appraisal is, the home was appraised at the time of purchase and you are not adding to the principal balance to your loan. So, your home more than likely has the required equity.
Below are a few more rules for the interest rate reduction loan:
- The rate may increase if you are going from an Adjustable Rate Mortgage (ARM) to a fixed-rate mortgage
- A lower principal and interest payment must be achieved to pass NET TANGIBLE BENEFIT
- A lender may offer a no out-of-pocket expense loan by raising your interest rate than enough to cover the closing costs
- The veteran may not receive cashback from the loan proceeds
- All closing costs must be recouped within 36 months
Net Tangible Benefit On Recouping Fees On VA IRRRL Refinance
Causing a change in the loan to lower the VA interest rate. Many investors and insurers have misinterpreted the guidelines. If you are trying to complete a rate and term refinance with an interest rate reduction loan, all fees must be recouped within 36 months. Prior to this clarification from HUD, lenders were not forcing the veteran to recoup the cost within 36 months when lowering the term on their VA mortgage. For example, when going from a 30-year fixed loan to a 15-year fixed loan, the result will be a higher mortgage payment. Even though the overall savings are there over the life of the loan when lowering your term, technically the veteran does not recoup the closing cost within 36 months. Up until about two weeks ago, lenders are letting this slide. Since then, investors will no longer accept the loan because HUD has sent out clarification on the guideline.
Please see the VA WEBSITE for more details.
Starting The VA IRRRL Mortgage Process
How to start a VA IRRRL loan:
- The process is quite simple
- You will simply need your driver’s license (or government-issued photo ID) and a current mortgage statement to start the process
- The lender will then complete verification of mortgage to verify all payments have been on time
Since there is not an appraisal or income verification, these loans close quickly!
Mortgage Rates To Be Eligible For VA IRRRL
Remember this is called an INTEREST RATE REDUCTION Loan. Your rate must be lowered! See below:
- ARM to FIXED – rate must be lowered at least .50%
- TERM REDUCTION – rate must be lowered at least .125%
- FIXED to FIXED – rate must be lowered at least .50%
- NO TERM REDUCTION – rate must be lowered at least .50%
Is A VA IRRRL A VA Streamline Refinance?
VA loans are the best home loan program available in the United States. However, only veterans of the U.S. Armed Services with a certificate of eligibility (COE) are eligible to qualify for VA loans. VA mortgages allow 100% financing with no money down on a home purchase. The VA insures and partially guarantees private lenders on VA loans in the event the borrower defaults and/or forecloses on their VA loans. VA loans have the lowest interest rates than any other loan program. However, credit scores do matter when lenders price out mortgage rates. The higher the credit scores, the lower the mortgage rates. Borrowers can refinance their VA loans with a VA IRRRL six months after closing their original VA mortgage. The VA has no maximum loan limits on VA home loans. In the following paragraphs, we will cover and discuss Understanding VA IRRRL Guidelines On VA Home Loans.
What is the Max LTV for VA Streamline IRRRL Refinance?
Understanding VA IRRRL Guidelines On VA Home Loans is very simple. The maximum loan to value on VA streamline refinance is 110% LTV at Gustan Cho Associates. The VA allows borrowers with a current VA loan to refinance their loan via the IRRRL streamline the process. What this means is no appraisal and/or income documentation is required. The credit scores are what determine the new mortgage rates on the new VA loan. Borrowers need to meet the IRRRL Net Tangible Benefits Policy. Borrowers need to have been timely on all of their mortgage payments for the past 12 months. There is no appraisal required. Only primary owner-occupant properties qualify. Manufactured homes that are permanently affixed to the foundation meeting VA IRRRL requirements are eligible. Incidental cashback may not exceed $500. Borrowers cannot do a cash-out refinance mortgage with a VA IRRRL. Cash-out refinance is allowed but is full credit qualifying mortgages.
Net Tangible Benefits Policy On VA IRRRL Refinance Mortgages
All IRRRL borrowers need to meet the net tangible benefits policy, Circular 26-18-13. This was passed on March 14, 2018, to protect borrowers and prevent loan officers from churning. In order for lenders to do an IRRRL, the borrower needs a net tangible benefit that benefits the homeowner. The borrower needs to recoup the costs and fees of the refinance within a 36-month recoupment period. The borrower needs to recoup all costs, fees, closing costs within the 36-month recoupment period. The new mortgage rate needs to be lower by 0.5% on fixed-rate mortgages. Net tangible benefits include refinancing an ARM to a 30-year fixed-rate mortgage. Fixed to adjustable-rate mortgages need to have an interest rate that is 2% or lower to meet the net tangible benefits test. Excluded are the funding fee, taxes, and escrow amount. Lender credits can offset these fees, which can be given depending on the mortgage rate.
Loan Level Pricing Adjustments (LLPAs) On VA Mortgage Rates
Mortgage companies can adjust rates depending on the borrower’s risk levels. Loan Level Pricing Adjustments (LLPAs) are based on the following factors:
- Credit scores
- Loan amount
- Occupancy type
- The number of units
- The county and state the property is located
- Debt to income ratios
- Manual versus automated underwriting system approval
- Other levels of risk
Not all lenders have the same LLPAs on VA loans. It is recommended that borrowers shop with various different lenders for the best pricing when thinking of a VA IRRRL.
Who Qualifies For A VA IRRRL?
Below is a list of the many benefits a VA IRRRL can benefit homeowners:
- No closing costs and/or fees
- Borrowers do not have to bring money to the closing table
- In most cases, borrowers will walk away with a refund of their existing escrow account
- Potentially skip one to two mortgage payments
- Lower mortgage rates mean lower monthly payments which mean tens of thousands in interest expense savings
- Streamline process: Most VA Streamline IRRRL refinances close in two to three weeks with very minimal paperwork and documentation
VA IRRRL Funding Fee
The VA IRRRL funding fee of 0.5% of the total loan amount is part of the closing costs. The mortgage lender determines if the borrower qualified for a Funding Fee exemption. The following factors are reasons why funding fees are exempt:
- Receiving compensation from the Department of Veterans Affairs for a service-connected disability.
- Entitled to receive compensation for a service-connected disability
- Not presently in receipt because they are on active duty and entitled to receive compensation
- Surviving spouses of a Veteran who died in service or from a service-connected disability
Do You Have To Pay Closing Costs on a VA streamline refinance?
VA IRRRL is a fast-tracked streamlined refinance mortgage loan program for homeowners with a VA Loan. Under VA Mortgage Guidelines, borrowers with a current VA Loan can do an IRRRL with no home appraisal, no income documentation, and limited documentation in as little as three weeks. There are two types of IRRRL: Credit Qualifying and Non-Credit Qualifying. Borrowers with higher credit scores should opt for the credit qualifying VA IRRRL and take advantage of the lower mortgage rates. Mortgage rates hit the highest levels in 2018 since the 2008 Real Estate Meltdown. The housing market has been stronger than ever in the past three years. Homeowners who closed on their VA Home Loans in 2018 can definitely take advantage of today’s low mortgage rates on VA Loans and benefit from an IRRRL. Mortgage Rates hit an 18 month low today with par rates at 4.125%. Any borrower with mortgage rates higher than 5.0% on their VA Loans may benefit from an IRRRL. In the following paragraphs, we will discuss the benefits of IRRRL for those with a current VA Loan.
Is Refinancing To A VA IRRRL A Good Idea?
IRRRL stands for VA Interest Rate Reduction Refinance Loan. The Interest Rate Reduction Refinance Loan is available to qualified homeowners who have a current VA Home Loan. It offers great benefits in refinancing a rate and term on a current VA Loan with limited documents and paperwork. VA Cash-Out is not allowed with an IRRRL. Only rate and term refinance are allowed. The purpose of the IRRRL is to lower the existing VA mortgage rate and lower the monthly mortgage payments by refinancing it to a new VA Loan with a lower interest rate. Homeowners with an adjustable-rate mortgage can refinance their VA Loan to a fixed-rate mortgage with very limited paperwork. There is no home appraisal requirement. The normal documents required for a full mortgage process is often not necessary. A new Certificate of Eligibility (COE) is not required with a VA Streamline Refinance Mortgage. In order to qualify for a VA IRRRL, the borrower needs to meet the net tangible benefit test.
Does VA IRRRL Refinance Mortgage Have Closing Costs
VA Loans require borrowers to pay a VA Funding Fee. There are instances where the VA Funding Fees can be waived for borrowers with service-connected disabilities. If a veteran is 100% disabled, then the VA Funding Fee is fully waived. Closing costs can be rolled into the loan balance. Lenders can offer lender credit for closing costs in lieu of a higher mortgage rate. In general, most homeowners do not have to pay a dime out of pocket. Most homeowners often get to skip two month’s mortgage payments when they do a VA Streamline Refinance Mortgage. Homeowners who closed on their VA Loans in 2018 can benefit from doing a VA Streamline Mortgage Refinance. As mentioned earlier, only rate and term refinance loans are allowed. Cash-Out refinance is not allowed with IRRRL.
Can You Do A VA IRRRL Refinance With Any Mortgage Lender?
As interest rates have dropped, now is a great time to reach out to see if a VA interest rate reduction loan will benefit you and your family. Gustan Cho Associates are experts in all VA financing. Our support staff is able to close interest rate reduction loans quickly. The veteran will also skip an entire month of mortgage payments when completing this transaction. If you are a veteran who thinks a lower interest rate would benefit your family, please call Mike Gracz on 630-659-7644 or text for a faster response. Or send an email to [email protected]. The team at Gustan Cho Associates is available seven days a week to answer any questions you may have.