5 Reasons to Go with a Streamline Refinance Loan

The true financial impact of the pandemic has now begun to come to the surface. Many homeowners are struggling to keep up with their monthly financial obligations, including their mortgages. If you are a current or former military service member with a loan backed by the Department of Veterans Affairs (VA) and you are having trouble keeping up with your monthly payments, help is available. Speaking with an experienced loan officer at Hero Loan can provide insight into a valuable tool offered by the VA called the interest rate reduction refinance loan (IRRRL). 

The purpose of this loan is to help veterans reduce their monthly mortgage payment. During times of financial hardship, this valuable VA benefit can help homeowners who served their country stay in their homes, as well as avoid adjustable-rate-related fluctuations in monthly payments to ensure that your budget can always accommodate all of your financial needs. 

IRRRL Basics

A VA IRRRL, also referred to as a VA streamline refinance loan or VA streamline IRRRL, can be used to refinance an existing VA loan for a lower interest rate. That makes monthly mortgage payments more affordable for loan holders, allowing them to have more money left over to spend on things that are important to them, including utilities, groceries, and car payments. When money is tight, reducing your housing payment can provide the leeway you need to avoid falling behind on other bills. 

To qualify for an IRRRL, you must not only have a VA-backed mortgage but also

• Be using the IRRRL to refinance that home loan specifically
• Be able to certify that the home backed by your VA loan is where you live currently or used to live
• Make the IRRRL loan your first mortgage if you also have a second mortgage on the home

While the VA requires that the principal and interest payment on a VA streamline IRRRL be less than the principal and interest payment on the loan being refinanced, there are some exceptions to the rule:

• If the VA streamline IRRRL is refinancing an adjustable rate mortgage (ARM)
• If the term of the VA streamline IRRRL is shorter than the term of the loan being refinanced
• If energy efficiency improvements are included in the VA streamline IRRRL

Top Reasons to Refinance with an IRRRL Loan

While the obvious reason for refinancing a VA loan into an IRRRL with lower VA streamline rates is to give yourself some financial breathing room, the process of doing so offers certain big advantages over traditional loan refinance processes.  

1. No re-qualification. The IRRRL is often called a VA streamline loan or VA streamline IRRRL because it’s meant to be an easy process; it’s not meant to add stress to the lives of current and former service members, who may already be dealing with financial hardships. As a result, VA mortgage holders do not have to re-qualify for this program. As long as they meet the requirements outlined above, the original VA loan qualification applies to the refinance.
2. No credit check. The VA streamline IRRRL does not require lenders to run another credit report to assess the mortgage holder’s creditworthiness. That’s a big plus for individuals who may be experiencing financial hardship, because too often, credit cards and other monthly bills can go unpaid when choices must be made about financial priorities. 
3. No underwriting. This is the process lenders use to verify things like income, assets, and debt, as well as to get all the property details, before issuing a final loan approval. It can be a nerve-racking time full of requests for documentation and requiring a new appraisal. Fortunately, an IRRRL loan comes with no underwriting, as the final approval for the original VA loan simply transfers over. 
4. No down payment. VA mortgage holders do not have to pay up-front for closing costs. These can be included in the loan balance and paid off monthly. With a no-money-down IRRRL, homeowners can borrow up to the Fannie Mae/Freddie Mac loan limits (and above that in some areas with a higher-than-normal cost of living). Even the VA funding fee, which is typically paid at closing, can be rolled into the loan. For an IRRRL, that fee is 0.5%, although some current and former service members may also qualify to have that waived.
5. No Certificate of Eligibility (COE). The COE you used for your original VA loan is sufficient to show your prior use of your entitlement for this loan. If you no longer have your original COE, your lender can get it for you electronically using the VA’s Home Loan portal. 

Hero Loan Can Help

It’s important to work with an experienced loan officer prior to initiating a VA streamline IRRRL to refinance, as they will divide your closing costs by how much you expect to save every month by refinancing to help you determine whether it’s worth it. Hero Loan is here to advise you on the costs and benefits of a VA streamline loan so that you understand what you’re getting into — and we make the process as quick and painless as possible.