Updated April 7, 2023
The VA Interest Rate Reduction Refinance Loan (IRRRL) – also called a VA Streamline – is a popular choice for veterans and servicemembers refinancing their VA mortgage. The streamlined process makes it faster and easier to refinance for a lower rate, change terms, or switch from an ARM to a fixed rate. Read on for the top questions we receive about VA IRRRLs.
What are the benefits of a VA streamline?
The VA IRRRL has many compelling benefits including a reputation for easier requirements, faster processing times, and lower costs than conventional refinances. And that’s just scratching the surface. Dig into other VA IRRRL benefits and you’ll find occupancy requirements to be less strict, opening up eligibility to second homes and investment properties (as long as the property was at one point your primary residence).
It’s important to note the streamline’s time- and money-saving benefits are partly the result of not offering an option to access your home equity. If you’re interested in tapping into equity, consider a VA cash-out refinance instead.
Do you need another appraisal?
Many borrowers are happy to learn an appraisal is not usually necessary for a VA streamline. That saves time and hundreds of dollars and avoids loss if your home value has dropped since your last appraisal.
There is an exception if you’re refinancing from a fixed rate to an Adjustable Rate Mortgage (ARM). Keep in mind not all lenders offer VA ARMs.
Do you need another credit check?
Here’s more good news: Most lenders do not require a credit check for a VA streamline refinance. Instead, they look for proof you’re keeping up with your current mortgage. That means the loan must be current and you’ve made on-time payments for the past 12 months.
What if you’re behind on your current loan?
While VA IRRRL requirements are generally more relaxed than other types of refinances, the VA does require your mortgage to be current. If you’ve fallen behind or made late payments within the past year, a streamline refinance may not be possible at this time. Contact an experienced VA lender to see what options are available.
Is a Certificate of Eligibility necessary?
The VA requires a Certificate of Eligibility (COE) for all VA loan types, including a streamline refinance. But meeting that requirement is easier than you may think. Since you already obtained a COE to get approved for your VA purchase loan, your lender will already have it on file. They can reference that same document, once again saving time and expense.
What are the typical costs?
A VA streamline costs less than other types of mortgage loans. We’ve already covered how you can save on the appraisal. The largest area of savings is with the VA loan funding fee.
Whereas funding fees for first-time VA purchase loans and cash-out refinances are calculated based on down payment and amount borrowed, and can reach as much as 3.3 percent, the VA streamline refinance funding fee is a flat 0.5 percent. There are even a few exemptions that allow borrowers to pay no funding fees at all.
VA IRRRLs will still have closing costs to cover lender and third-party fees, but these are typically lower than they are for other loans. Your loan estimate will outline these costs so you know the details ahead of time and can make an informed decision. And just as with other mortgages, you may have the option to roll the fees into your monthly payments instead of paying them up front.
What are the qualifications?
The key to qualifying for a VA streamline is to demonstrate you can afford and will benefit from the new loan. You must meet all of the following VA loan refinance requirements:
- You are a current VA loan borrower
- You’ve made on-time mortgage payments for the past 12 months
- You have proof that you live in or have lived at the house as your primary residence
- There is a net tangible benefit to refinancing, either by saving money or getting out of a riskier loan such as an ARM.
Still have questions?
Streamline refinances can help VA borrowers save time and money both at the time of refinancing and over the lifetime of a loan. The process may be simpler than other mortgage types, but it doesn’t mean the decision is easy to make.