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VA IRRRL Mortgage Refinance Program for Veterans – Qualification Guidelines and Loan Eligibility Requirements

A qualified veteran can lessen monthly mortgage payments and also tap into existing home equity with VA refinance mortgage loan programs.

A VA streamline (IRRRL) loan is primarily used to do a Rate-and-Term refinance transaction. A cash-out VA mortgage loan can help pay major expenses related to college education, home improvement and debt consolidation. If the interest rates are much lower compared to your current home loan rate, VA refinancing through an IRRRL can help you save money by reducing your monthly interest payments through a new streamline loan.

Depending on your current needs and current interest environment, a number of options are available to refinance using a VA home loan.

If you are interested in tapping your home equity, VA mortgages that allow for cash-out refinance may be the right choice for you.

A refinance transaction usually pays off an existing mortgage loan with a new loan. If considerable equity has already been accrued, then the new VA loan allows the borrower to take advantage of it for any purpose of the borrower’s choosing. This type of refinance transaction is commonly considered to be a “cash out” or “debt consolidation” mortgage loan.

VA IRRRL Mortgage Requirements

A VA IRRL loan is also referred to as “Streamline” refinance. The Streamline Refinance guidelines are very simple and straight-forward. No cash can be taken out by the borrower with this type of VA refinance. Closing costs and energy efficiency improvement costs can be included. VA IRRRL guidelines do not require the lender to perform a new appraisal or credit, income underwriting as long as the loan that is being refinanced was also a VA guaranteed loan. Borrowers that just want to lower their interest rate, change loan term or convert their current VA ARM loan to a VA Fixed rate loan can qualify for the streamline refinance mortgage.

IRRRL streamline loans do not allow for assumption. A borrower need not currently occupy the property, provided they have fulfilled the occupancy requirement earlier. No cash back is allowed. Just relevant closing costs can be included in the new refinance loan. Second loans or home equity loans existing on the property must be subordinated to the new VA first loan.

As the current mortgage interest rates are at historical lows, veterans can lock-in their rates by opting for a streamline loan offered by a VA refinancing lender. This loan’s “no cost” option is the primary driver of its popularity among veteran home owners looking for “rate and term” refinance. One should carefully understand the specific refinance option’s guidelines and requirements to choose the appropriate option suitable for their financing needs.

VA Streamline (IRRRL) Refinance Guidelines

VA basically acts a guaranteeing party for the lender providing residential mortgage financing to the veteran that meet its lending guidelines and requirements. A veteran seeking a VA guaranteed home loan must qualify based on the financing lender’s underwriting requirements related to income, credit and assets. A lender can choose to employ stringent loan qualification criteria while evaluating a prospective borrower’s financial profile. Factors that are explicitly not be required by VA to back a mortgage home loan may also be given prominence by the lender originating the loan according to the approval process followed by them.

The VA loan eligibility depends primarily on the debt-to-income ratio. The residual income left for the household after paying for all the housing related expenses, monthly debt payments and taxes is used by approved VA lenders to determine the eligibility of prospective seekers of a VA insured mortgage loan. The residual evaluation followed in VA underwriting is much preferred to the plain vanilla debt-to-income ratio used in conventional residential lending guidelines.

It’s the responsibility of a VA mortgage lender to thoroughly assess the monthly income, assets, debts and payments to make sure that an eligible veteran’s financial profile meets the VA residential lending guidelines. A VA loan eligible borrower should collect all the documentation that substantiates these requirements to speed up the loan approval process on both purchase and refinance transactions.

Mortgage lenders that finance residential properties based on conventional mortgage guidelines usually require a borrower to pay for Private Mortgage Insurance when a high LTV home loan is involved. VA allows 100% financing with no requirement of PMI on the loans they guarantee. Instead, an upfront funding fee is assessed on all VA purchase and refinance loan transactions. Veterans receiving disability compensation related to the service are exempt from paying the VA funding fee.

Veterans Administration does not handle the loan process or provide the actual funds involved in VA home financing. All aspects related to the loan pre-qualification and approvals are exclusively handled by the VA lender originating the residential loan. A VA lender also handles all the paperwork and documentation, not VA department. Lenders also pre-qualify, complete loan application, gather supporting financial documents, order the appraisal and title, schedule a closing date and fund the loan. These steps performed during the VA loan approval are comparable to those followed in conventional real estate financing.

A VA lender ultimately holds the discretion to either approve or reject a VA loan upon carefully considering all relevant details. The interest rates and discount points charged by lenders for financing VA home loans vary greatly according to the prevailing secondary market conditions and their respective funding sources. By shopping around and comparing the various financing options, a borrower can become assured of locking in a competitive interest rate with very reasonable and necessary closing costs.

VA lending guidelines clearly emphasize the occupancy requirement. Only properties to be occupied as a primary residence by the veteran after purchase can be financed through a VA loan program. The primary residence requirement can be waived for borrowers seeking faster financing through the streamlined VA IRRRL loan.

VA loan benefits can be reused in the future. The home loan benefits offered by VA do not end after just using them once. Any unused portion of the loan benefit gets carried forward. All state, county and local housing programs or grants have blanket approval from VA. Due to this they can be utilized in combination with VA home loan programs without special permission or review. Grants and programs that are offered to buyers by other non-public entities must be approved by VA before the closing.

The guaranty provided by VA only applies to the lender underwriting and funding the home loan for an eligible veteran. A thorough house inspection is the best way for the buyer to make sure that no significant issues have been overlooked. An appraisal cannot be considered as a substitute for a home inspection as the former a qualified opinion regarding the value of the property based on a rough overview of the property condition, local market and recent sales, while the latter primarily assesses the physical condition of the property by highlighting any issues that needs attention.

VA Cash-out Refinance Guidelines

A VA cash-out refinance loan allows a qualifying veteran to payoff high interest debt, college loans and any other debt. One may also use refinancing to make further home improvements to increase their residential home value. A number of VA lenders process these loans quickly and efficiently according to the refinancing guidelines set by Veterans Administration.

VA cash-out refinance guidelines require that the veteran still occupy the property as his/her principal residence. When sufficient home equity is present, the owner can take out a 90% LTV loan that can also include closing costs and other fees. As long as the LTV requirement is met, the seasoning of the loan may not be needed. For exact VA refinance guidelines, consult the VA lender handling your loan.