You’ve served your country and made the most of your VA benefits by purchasing a home with a VA loan. It may be time to refinance your current loan to make it more affordable through a streamlined, simple process.
A VA Interest Rate Reduction Refinance Loan (IRRRL) provides an efficient way to lower your interest rate and monthly mortgage payments, using less documentation than your current VA loan required. Similar to the VA purchase loan, it’s meant to help active-duty military, veterans, and their surviving spouses finance homes affordably.
What is a VA Interest Rate Reduction Refinance Loan?
After you purchase your home, you have the option to refinance your mortgage. When you refinance, you replace your current loan with a new one, which comes with various benefits depending on the refinance type.
With the VA Interest Rate Reduction Refinance Loan (IRRRL, pronounced “Earl” for short), those who purchased a house with a VA loan can refinance to reduce their interest rate and lower the amount paid on their loan, all through a streamlined process.
Like your original VA loan, a VA IRRRL is backed by the government through the U.S. Department of Veterans Affairs. It was created to make it easier for those eligible to refinance their existing loans and make them as affordable as possible.
Backed by the VA, lenders are able to offer VA IRRRLs with approvals that use much of the same documentation from your current mortgage. This is simpler than getting a purchase loan, while still getting the benefits of a new interest rate and terms.
With the VA IRRRL there is often no appraisal, income verification, or minimum credit score required, and the VA funding fee is reduced or eliminated.
How to Get a VA IRRRL
To learn whether a VA IRRRL is the best option for refinancing your home, connect with us. To get you started, we’ve outlined the steps and documentation needed to help you understand the process.
The Refinancing Process
We can help you assess whether your current VA loan’s interest rate is higher than market rates. If it is, we’ll explain your options for refinancing and see if a VA IRRRL can lower your interest rate enough to make your home loan more affordable.
If you’ve paid at least six months of mortgage payments and it’s been about seven months or more since your current mortgage closed, you may be eligible. We’ll assess the documentation used for your current loan to see if any further documents are required.
We’ll also discuss the new potential terms you qualify for and your options, guiding you through each step until we can close your new refinance loan. With the VA IRRRL, the entire process is often completed in less than a month.
VA IRRRL Requirements to Meet
These are the common requirements often needed to qualify for a VA IRRRL. If you have questions about these requirements, we’re here to help.
As you already have documentation on file from your current VA loan, you won’t need as much to qualify this time around. This makes the qualification requirements easier to reach with a “low-doc” loan such as this. To refinance, you’ll need the following:
- Your Certificate of Eligibility (CoE). You can typically either share the one you used for your original VA loan or request that we get it from the VA’s online portal.
- A current mortgage statement for the VA loan you have now. You’ll need to show you’re current on payments and haven’t had more than one 30-day late payment within the past year.
- Employment verification, but you likely don’t need income verification.
- That you’re able to pay the VA funding fee, which can be waived in certain circumstances.
- That you currently or previously occupied the property as your primary residence.
- There needs to be enough financial benefit for you to refinance, meaning that (in most cases) your new rate needs to be lower and your monthly payment needs to be less than your last month’s loan payment.
VA IRRRL FAQs
Your home is a major investment. It’s ok to have questions about refinancing it. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.
You can refinance your current VA loan with a VA IRRRL after you’ve made at least six full mortgage payments on the current mortgage you have from purchasing your house. This means you can refinance as soon as seven months (210 days) from the date of your original closing.
First you need to currently have a VA loan to move forward with a VA IRRRL.
Like the VA Loan, eligibility for the VA IRRRL is service-based and proven through a Certificate of Eligibility (CoE) from the U.S. Department of Veterans Affairs. The VA evaluates eligibility based on your service status, your years of service, and your service record.
You may meet eligibility requirements if you are:
• A current active-duty military service member,
• A military veteran, or
• The spouse of a service member, including a surviving spouse
Detailed guidelines are available on the VA’s website. With a VA IRRRL we can often use the CoE you have on file for your current VA loan to meet the requirements to refinance. If you don’t provide it directly, we can help you by getting it from the VA’s online portal.
You’ll also need to meet other loan requirements and provide some documentation, but the process is simpler than with a VA purchase loan, making it easier to get approved.
The VA IRRRL is only available to those who currently have a VA loan. It provides a unique benefit to servicemembers, veterans, and eligible surviving spouses. Because it uses a streamlined process, it makes lowering your interest rate and monthly payments fast and simple. The VA IRRRL is so efficient to process that it also allows for benefits like lower loan origination fees, meaning you pay lower closing costs.
This simplicity comes with fewer qualification requirements but also means you may have fewer refinance options.
A conventional refinance can be done from various types of purchase loans, including a VA loan. It provides broader options for rate and term refinances or cash-out refinances. However it also requires more documentation, more time, and a higher credit score for approval.
The VA IRRRL is a streamlined rate and term refinance, meaning its purpose is to lower your interest rate through a simple and efficient standardized process. For this reason it doesn’t allow for borrowing cash from the value of your home. There are other loan programs through the VA that provide cash-out refinance options, which require more documentation.
To ensure the program is financially sustainable for all eligible veterans, the VA funding fee for the VA IRRRL is a one-time cost of 0.5% of your loan amount.
The VA also allows for exceptions around paying the funding fee. This includes Purple Heart recipients, veterans with service-related disabilities, and surviving spouses of veterans in certain circumstances.
Along with the VA funding fee there are closing costs that range from 1-3% of the loan amount. Both the funding fee and closing costs can be paid upfront or be rolled into your loan to be paid monthly. Rolling them into your new loan may increase your interest rate.