When interest rates are low, many Veterans who have VA loans in Arizona are interested in possibly doing a VA IRRRL streamline refinance.
But when is the VA IRRRL allowed?
The VA IRRRL Streamline Refinance program allows a Veteran to refinance their existing VA loan to a new VA loan to a lower interest rate with a reduced amount of documentation.
VA Streamline IRRRLs are allowed under the following circumstances:
- Pay off veteran‘s existing VA loan with current entitlement being transferred to the new loan. No additional entitlement will be used. Regardless of the amount of entitlement being transferred to the new refinance loan, the guaranty coverage will be 25%.
- New interest rate must be lower than the existing interest rate (unless refinancing from an ARM to a fixed rate).
- Veteran must sign statement acknowledging the interest rate and the payments of the new loan versus the old loan and how long it will take to recoup all closing costs paid (both those closing costs included in the loan and those paid outside of closing.
- May include existing VA loan balance, allowable closing costs, prepaids, energy efficient improvements up to $6,000 completed within 90 days immediately preceding loan closing and up to a maximum of 2% discount points.
- Pay off of second liens is not allowed. Second liens are to be subordinated with no consideration to the CLTV.
- Total loan amount may not exceed the appraised value or original loan amount, which may include the funding fee.
- Cash-out is not allowed. However, a maximum of $500 may be allowed due to computational error, changes in the final payoff, up-front paid outside of closing (POC) items being reimbursed or refund of an escrow account on the old loan if different lender other than the current holder originates loan. Loan amount calculated when submitting to underwriting should reflect no funds going back to the borrower. Any cash-out (other than POC items) on loans in Texas is not allowed.
- High balance VA Streamline IRRRLs are not allowed.
If you are a Veteran who currently has a VA loan, it may make sense to speak with a loan officer about whether or not the VA IRRRL streamline refinance will help you lower your monthly mortgage payment – and now you have a good idea about when the VA IRRRL program is allowed.