Learn More About The VA IRRRL Program

What is an IRRRL?

IRRRL stands for the Interest Rate Reduction Refinancing Loan, you may also see it referred to as a “VA Streamline”. It is used to refinance an existing VA guaranteed loan into a new VA guaranteed loan to reduce your interest rate and lower your monthly payments.

The VA already guarantees your loan, so they offer this program to lower your payments, making it easier for you to afford your mortgage. Making your payments more affordable reduces the likelihood you will default on your mortgage, so this program benefits not only you, but also the VA home loan program in general.

What are the requirements?

To qualify for a VA IRRRL refinance, the loan you are refinancing must be a VA guaranteed loan. The new loan will re-use the entitlement you originally used when you first got your mortgage. A new Certificate of Eligibility is not needed, as we will verify your previous loan information by using the VA automated system, WebLGY.

No appraisal or income underwriting is required by VA. The occupancy requirement is also different from other VA loans. When you originally obtained your VA loan, you certified that you occupied or intended to occupy the home. For an IRRRL, you only need to certify that you previously occupied it. The VA also requires that the new IRRRL refinance lower your interest rate by at least .500% (half a percent) and that the closing costs you pay are less than or equal to what you will save in the first 36 months on the loan.

This required savings in the first 36 months of your loan is known as the recoup period. This means that if it will cost you $3,600 in closing costs to do your IRRRL refinance, your payment must go down at least $100 a month. While the VA requires that your recoup period be less than 36 months, we aim for a recoup period of 12 months or less. Learn more about the VA IRRRL program directly from the VA: https://www.va.gov/housing-assistance/home-loans/loan-types/interest-rate-reduction-loan/

Did you receive a letter in the mail about a “special” refinance program for veterans. Is this the same program?

Some lenders may send you a mailer suggesting that they are the only lender with the authority to make IRRRLs. This is not so, any lender of your choice may process your application for an IRRRL. And you do not have to go to the lender you make your payments to now or to the lender from whom you originally obtained your loan. At Veteran Lending Resources, we will run options for you with over 30 lenders to make sure you receive the most competitive terms.

Why do a VA IRRRL Refinance?

There are several reasons why VA homeowners want to take advantage of a VA Streamline Refinance. The most common is that an IRRRL lowers your interest rate by refinancing your existing VA home loan. Simply put, a lower rate means that your monthly mortgage payment will go down!

Using the VA IRRRL program instead of a tradition refinance may be the best way to lower your mortgage rate because of the following key benefits unique to the VA IRRRL program:

No appraisal:

Since the VA has already guaranteed your loan, there is no requirement to determine your home’s current value. This benefit can be especially useful if you recently did cash out VA mortgage, as the new VA IRRRL loan will no longer be considered a high-risk loan.

No income verification:

The VA IRRRL does not require income verification for all borrowers, this means that there is no need to provide paychecks, W2 forms, or tax returns. But we do have to document you have a source of income to make sure you can continue to make your payments.

Soft pull credit only:

Because there is no underwriting or income analysis, a traditional mortgage tri-merge credit report is not needed. We only do a soft pull credit report to confirm your loan payments are being made on time and to determine your credit score. This means no ding to your credit score.

No upfront cost:

In the traditional mortgage refinance process, ordering and paying for an appraisal is one of the first steps. Since the VA IRRRL program does not require an appraisal, there is no need to pay for one to start the process.

Option of no money due at closing:

The VA IRRRL program allows you to include all closing costs, interest, taxes, and insurance payments due to be included in your new loan. This means you are not required to come in with any money at your closing. But be aware that this will increase how much you will owe.