What Is a VA Streamline (IRRRL) Refinance?

If you are a VA loan borrower who needs to update your current mortgage to better suit your financial goals, a VA streamline refinance (VA IRRRL) is a great option. Due to its minimal documentation requirements and lower closing costs, the VA streamline refinance is a quick way to get the terms and rate you are looking for.

Read on to learn exactly what a VA IRRRL is and how it can benefit you.

What is a VA streamline (IRRRL) refinance?

The VA streamline refinance, also called an Interest Rate Reduction Refinance Loan (IRRRL), is a popular refinance option because there is far less paperwork involved than with other refinance options. Although a borrower cannot get cash out, this type of refinance can lower your interest rate or change the loan term.

What are the benefits of a VA IRRRL?

VA IRRRLs are designed with servicemembers and veterans in mind, so it is no wonder they come with a number of advantages. For starters, there is typically no appraisal required. Not only does that save money, but it also means the loan process can go faster because borrowers are not waiting for the appraiser.

Arguably, the most attractive benefit of a VA IRRRL are the low rates. Borrowers can often save hundreds of dollars each month on their mortgage payments, then use those savings to pay down the loan faster or give themselves some flexibility in their monthly budget.

A VA streamline refinance is also not just for primary residences. Second homes and investment properties are eligible for an IRRRL as long as the borrower has previously lived in the property as their primary residence. That could make a big difference, especially for rentals. With a lower monthly payment, there is more profit.

How does a VA streamline refinance work?

Typically, an IRRRL can be completed within 30 to 45 days thanks to its quick application process and no appraisal. However, there are a couple of requirements that the borrower or loan must meet in order to be eligible.

For instance, the 210-day rule is the waiting period. That means you must make six consecutive payments on the original VA loan before you are able to refinance it. There is no limit set on how many times you can use the IRRRL program to refinance your VA loan as long as all requirements are met.

Other VA loan refinance requirements you will be required to meet include:

• You are a current VA loan borrower
• You have made on-time mortgage payments for the past 12 months
• You have proof that you currently live in or have lived in 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

Unlike other refinance options, most lenders will not require a credit check for a VA streamline refinance. They look for proof you are keeping up with repaying your current mortgage instead.

What documents do you need for a VA IRRRL?

Although there is much less paperwork involved, you will still have to meet a few VA IRRRL document requirements that include the following:

• Current mortgage statement
• VA loan paperwork
• Certificate of Eligibility (COE)
• A recent pay stub or proof of income

Since you already obtained a COE to get approval for your VA purchase loan, your lender should already have it on file, saving you more time when you start the process.

Does the VA IRRRL have closing costs?

There may be closing costs that borrowers are responsible for covering. And for borrowers who have gone through the mortgage process within the last ten years, they know how much those fees can add up. It is important to prepare for the following costs:

• Title fees

• Recording fees

• Transfer taxes

• Credit report

• Flood certification

• Tax service fees

• VA funding fee

• Appraisal fee (if applicable)

Borrowers are able to pay for these fees out of pocket at closing or by wrapping the closing costs into the loan, which raises the principal. However, there are lenders who offer the No-Closing-Cost VA Streamline Refinance (IRRRL).

What is the No-Closing-Cost VA Streamline Refinance (IRRRL)?

Some credit union lenders who focus on servicing military families offer No-Closing-Cost VA Streamline Refinance options. Essentially, these lenders will cover most of your closing costs and waive their fees if you are eligible. However, there are a few items you will still need to pay for, including:

• Discount points: If you want to buy the rate down even further

• Pre-paid costs: Like homeowners insurance and property taxes*

• Escrows: For insurance and property taxes* 

*These are not an extra cost, and insurance and taxes are required. By setting up a new escrow account, the borrower will most likely get an escrow account refund from the prior mortgage service.

Is a VA IRRRL worth it?

If your current VA loan is not meeting your homeowner needs or assisting in your financial goals, then a VA IRRRL may be a great option for refinancing. But before you decide it is time to refinance, be sure to discuss all of your refinance options and their associated fees with a trusted lender who can assist you through the refinance process with confidence.