Understanding IRRRL Refinancing for Veterans

If you're a veteran with a mortgage, you're eligible for a special type of refinancing called an Interest Rate Reduction Financing Loan, or IRRRL. What is an IRRRL, how does it work, and is it right for you? Read on to learn more about your mortgage loan options in Kansas City.

What is an IRRRL?

An IRRRL is sometimes referred to as a VA Streamline loan. It's a way to quickly refinance your existing VA loan at a lower interest rate and with less paperwork and fewer requirements than a standard VA Cash-Out refinance. You can also use an IRRRL to convert an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, at today's low interest rates.

Perhaps the most appealing part of an IRRRL is how easy it is to get one. Unlike most other loans, an IRRRL doesn't require an appraisal or a new Certificate of Eligibility (COE). If you have a current VA loan, that's all you need to apply for an IRRRL.

Who is Eligible for an IRRL?

To obtain an IRRRL, you must be a veteran and your current property must be financed with a VA loan – that is, a loan guaranteed by the United States Department of Veterans Affairs (VA). VA loans are issued to veterans of the U.S. armed services, those currently serving in the military, reservists, and spouses of the deceased military personnel who have not remarried. These loans are typically used to purchase single-family homes, condos and townhouses, multi-unit properties, and new construction.

An IRRRL is essentially a VA to VA refinance. It reuses your existing VA entitlement.

How Does an IRRRL Work?

Here are the important things you need to know about how IRRRLs work:

·         The IRRRL can only be used to refinance an existing VA loan. You cannot use an IRRRL to refinance any loan that is not a VA loan.

·         No new appraisal, credit underwriting package, or COE is required. (Some individual lenders may require a credit report or appraisal, however.)

·         You don't have to currently occupy the property, although you certainly can (and probably still do) live there. You need only to have previously occupied the home.

·         The loan may not be greater than the outstanding balance on your current loan plus typical closing costs and related fees. You cannot receive any cash from the proceeds of the loan.

Note that the interest rate of the IRRRL must be lower than the interest rate on your current loan, unless you're rolling an ARM into the new fixed-rate loan. 

What Closing Costs are Required?

Many IRRRLs are processed with no money out of pocket. That is, all closing costs can be rolled into the new loan amount. This may result in a slight increase in the payment.  You can always opt to pay the closing costs in cash, of course.

The VA does require a funding fee of 0.5% of the mortgage amount. This fee can be paid in cash (by you, the borrower) or included in the price of the loan.

Who Offers IRRRLs?

The government does not require lenders to offer IRRRL. That said, many lenders do, and any lender can process your IRRRL application.

When shopping for a lender for your IRRRL, the current holder of your VA loan is a good place to start. However, you don't have to use this lender and are free to shop around for the best deal. It's possible that there may be significant differences in the terms offered by different lenders.

Let the Kansas City Mortgage Guy Handle Your IRRRL

Interested in refinancing your mortgage in Kansas City? If you're a veteran with a VA loan, the Kansas City Mortgage Guy can handle the entire process. We can help you find the best loan with the best rate, with the least amount of hassle. You'll save time and money – and get the loan you need.

Contact the Kansas City Mortgage Guy today to learn more about refinancing your home loan!