January 14, 2022
When it comes to refinance home loans for veterans and service members, there are many advantages of a VA IRRRL compared to other rate-and-term refinance loans. Read on to see what they are and if an Interest Rate Reduction Refinance Loan IRRRL is right for you.
#1 Easier Qualifying Than Conventional
Generally, all VA loans, including the a VA Streamline Refinance or sometimes called a VA IRRRL (Interest Rate Reduction Loan), are easier to qualify for than a conventional loan. That’s because the Veterans Administration has a strong purpose of helping veterans with their home loan needs. The same thing is true for many lenders who specialize in VA loans.
#2 VA Streamline Refinance Credit Score Requirements
When you get a VA IRRRL loan, the lender will pull your credit to ensure you’re a reasonable credit risk. They’ll especially look at your past mortgage payment history. But, just like with other types of VA home loans, the VA credit guidelines are less stringent than for a conventional loan. So, if you’re comparing getting an IRRRL vs. a conventional refinance, make sure you include your credit score when pricing out your interest rate. You may be surprised by the difference.
#3 Streamlined Process
Compared to a VA refinance where you’re getting cash-out, an IRRRL is streamlined and should take less time. Of course, it depends on how busy your lender is but an IRRRL is generally easier to process and can close faster. Plus, since you’re not taking cash-out, that makes things even more straightforward. Another thing to keep in mind is there are no conventional streamlined refinance loans.
#4 Second Homes are Eligible
Another IRRRL advantage is that you can refinance a second home with an IRRRL. That’s a unique feature because with a VA purchase or cash-out — the house has to be your primary residence. But, for an IRRRL — your second home only needs to have been your primary residence in the past.
#5 Investment Properties are Eligible
Just like with a second home, as mentioned above, an IRRRL can also refinance an investment property. You’ll just need to state that the investment property was your primary residence at some point in the past.
#6 Streamline VA Refinance — No Appraisal
IRRRLs do not require an appraisal unless refinancing from a fixed loan product into an ARM loan product. That can save you a few weeks because appraisers get booked up in the busy season, so you have to wait for them to fit you into their schedule.
#7 Veterans are Protected
Just like with all VA loans, there are specific guidelines for VA refinance loans. There’s a set of calculations that determine the “net tangible benefit”. The completed form shows if the loan is in the best financial interest of the veteran.
#8 May Not Need Termite Inspections
In many cases, lenders don’t require a termite inspection for an IRRRL. That’s another thing that streamlines the process and makes the loan go faster.
#9 Low VA Rates — Streamline Refinance
When comparing an IRRRL, that’s a straight rate-and-term where you don’t get any cashback to any cash-out refinance, both VA and conventional, the rate will be lower. That’s because there’s less risk for the lender.
#10 Higher Loan Limits
If you have full VA entitlement, you wouldn’t have a loan limit — although many lenders limit their VA home loans to $1,500,000. The advantage of VA loans and refinancing a VA loan is that the loan limits are higher than conforming loans. So, you’re not hit with high jumbo rates.
We wanted to mention that sometimes, lenders will offer low or no closing costs IRRRLs. So, it’s wise to see what incentives are available when shopping for a refinance.