How Does VA IRRRL work IRL?

When most people see IRRRL, they probably think someone was trying to type the acronym IRL and fell asleep on the “R” key for a second. In reality, VA IRRRLs help military members and their families every day to refinance the home they bought with their VA loan eligibility. While it is true that any approved VA lender can help any approved person or persons with a VA home loan refinance with a VA IRRRL, using a VA mortgage specialist is the best way to ensure you’re getting everything you need out of your refinance. This week, we’re going to explore some of the intricacies of VA IRRRL and how they impact you as a buyer.

What is a VA IRRRL?

A VA IRRRL, or a Veteran’s Interest Rate Reduction Refinance Loan, is a way to lower your interest rate and decrease your overall mortgage payment through refinancing. It is also possible to convert an ARM (adjustable mortgage rate) into a fixed mortgage rate through this process. These are loans which require no money out of pocket, minimal underwriting documentation and an appraisal is not required. The only special requirement of a VA IRRRL is a funding fee which we will explain later. Unlike cash-out options, homeowners are not eligible to receive any cash-out using a VA IRRRL.

Who can get a VA IRRRL?

To refinance with a VA IRRRL, your current loan must be a VA loan. This is crucial. VA to VA is the industry phrase used, but it simply means that a standard, non-VA loan cannot be refinanced using a VA IRRRL. To apply, the person or persons approved will already have a certificate of eligibility through their original VA home loan, so it is not required to get another. It is important to talk with your lender to understand their process because guidelines and requirements may vary from lender to lender.

What is a funding fee?

Typically, VA borrowers are saddled with a 0.5% funding fee. This fee goes directly back to the VA to help them cover costs they incur on loans that go to default. In many cases, the fee can be waived for borrowers with any number of other circumstances including but not limited to: veterans with a disability from their time in service, veterans who are receiving compensation for a disability from their time in service, a veteran’s surviving spouse after he or she was killed in the line of duty, etc. If there is a funding fee, it must be paid from the proceeds of the refinance.

Obviously, there is more to know when it comes to your VA IRRRL. This is just the tip of the iceberg. So, if this option sounds like something that could benefit you or your family, talk to a mortgage specialist today about how a VA IRRRL could lower your mortgage payments!

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