This BLOG On VA IRRRL Mortgage Guidelines For VA Home Loans Was PUBLISHED On July 1st, 2019
VA IRRRL Mortgage Guidelines For VA Home Loans:
- 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 at Loan Cabin Inc. are direct lenders with no lender overlays on VA Mortgages.
About VA Mortgages And VA IRRRL Mortgage Guidelines
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 has 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 IRRRL Mortgage Guidelines On New Appraisal Requirements
An appraisal is not needed when you complete a VA IRRRL. The reason you do not need an appraisal is, the home 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 cash back from the loan proceeds
- All closing cost must be recouped within 36 months
Net Tangible Benefit On Recouping Fees Of The VA IRRRL
That last bullet point there is what sparked the change in the VA interest rate reduction loan. Many investors and underwriters of like misinterpreted the guideline.
- 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
- 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!
New Rates Need To Be Lower Than Original Mortgage Rate 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%
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 faster response. Or send an email to firstname.lastname@example.org. We are available seven days a week to answer any questions you may have.