UNDERSTANDING A VA IRRRL REFINANCEThe government is big on acronyms and the Department of Veteran’s Affairs is no different. The VA mortgage program has a specific type of refinance loan called the Interest Rate Reduction Refinance Loan, or IRRRL. This is a program unique to the VA and allows those with existing VA mortgage loans refinance with less documentation required and a streamlined approval process. In fact, many VA lenders refer to the IRRRL programs as the VA streamline due to the ease of an approval.
For example, when borrowers use their VA eligibility to buy and finance a home, the approval process is much like any other loan used to buy a home. The lender must document using various third parties the income and assets of the applicant. Applicants will be asked to provide their most recent pay check stubs covering a 30 day period as well as their two most recent W2 forms. If the borrowers are self-employed or otherwise use other types of income to qualify for the loan they can expect to provide their two years most recent federal income tax returns. Bank statements will also be required to make sure the veteran has enough funds available to cover any and all closing costs associated with the mortgage.
Lenders will also pull a credit report and can require a minimum credit score. Rental history in the form of cancelled checks to a landlord can also be requested to validate a timely rental history. The subject property will also be evaluated and inspected to make sure not only if the property is in good shape but also to compare the sales price with recent sales of similar properties in the area. Getting approved for an initial VA loan does really require a host of documentation but really no more than any other type of loan.
With the use of an IRRRL streamline the required documentation is dramatically reduced. There is no need to verify income or employment. This essentially means the borrowers can be unemployed and still qualify. There is no credit score requirement, either and the only credit that needs to be verified it to make sure there are no more than one mortgage payment made within the last 12 months more than 30 days past the due date and no such late payment within the past six months.
To qualify for an IRRRL the refinance must be a VA-to-VA transaction, no cash out may be pulled and there needs to be a valid refinance for the refinance such as lowering an interest rate or switching from an adjustable rate mortgage to a fixed rate. For those with an existing VA loan and a refinance looks like a good idea, they can expect the VA IRRRL option to be provided to them by their loan officer. There really is no other loan process that is easier than the VA streamline.
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