VA Refinancing Loans

The Veterans Administration (or the VA) has a mortgage refinance program that is very similar to the Streamline refinance program used by the FHA. The VA’s program is called an Interest Rate Reduction Financing Loan, or an IRRRL loan.

One of the nice things about at IRRRL loan is that a property appraisal isn’t required, which can save several hundred dollars. When you apply for an IRRRL loan there is no credit check run on you and the VA doesn’t even care if you can prove that you have a reliable income or not.

Keep in mind, however, that while the VA may not care about your credit history or your current income, the VA isn’t the one actually making the loan to you – the VA merely insures the loan – and the lender who is actually making the loan may have requirements as to income and past credit history.

If a lender tries to make you think that he is the only lender making IRRRL loans a red flag should immediately go up and the lender should be reported to the VA. Although no lender is required to make VA loans, almost any lender can make an IRRRL loan.

Also, if a lender tells you that the VA requires certain closing costs to be included in the loan, another red flag should go up. The only closing cost that the VA requires is a funding fee equal to one half of one percent of the total amount of the loan. This fee can be paid in cash or it can be included in the loan amount.

The third thing to be wary of are lenders who advertise a “No cost” VA refinance IRRRL loan. Lenders who advertise this way are not being entirely truthful. The truth is there are fees, but these lenders wrap the fees into your loan amount so that you do not have to pay them up-front and out-of-pocket. However, by including the fees in your loan amount you are paying interest on the fees for the next 15 to 30 years.

Keep in mind that different lenders may have different lending requirements, i.e., income verification, etc., and you are not required in any way to get your IRRRL loan at the same lender who made your original VA-backed home loan.

Shop around for your best rate and terms, as well as, the least amount of paperwork. By checking out lenders online you can easily compare several lenders side-by-side without even leaving your home.

IRRRL VA loans are sometimes referred to as “VA to VA” loans since in order to qualify you must have already used your VA loan eligibility on the property you are trying to refinance. The new IRRRL loan for which you are applying, will reuse your original VA borrowing entitlement.

If you have your Certificate of Eligibility handy it might be wise to take it with you when applying for the IRRRL loan, but this is not really required as the lender will be able to verify your eligibility even without your certificate.