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IRRRL / VA Streamline Refinance Emerges As Popular Refi Choice

Dan Green
The Mortgage Reports contributor

VA Mortgage Rates Drop

Mortgage rates have moved lower through most of 2015.

As rates have dropped, refinance opportunities have opened for homeowners who have owned their homes for at least 90 days. Falling mortgage rates can reduce homeownership costs over the long-run and one group well-suited to take advantage is homeowners with U.S. military experience.

VA mortgage rates are the lowest of today’s common mortgage types, and VA loans are typically available with little or no cost to the homeowner.

Furthermore, the most popular VA refinance loan — the VA Streamline Refinance — is among the fastest and easiest refinance loans available in today’s mortgage market.

Verify your new rate (Jul 18th, 2019)

VA Home Loan Guaranty Program

As part of the 1944 G.I. Bill, the VA Loan Guaranty Program was launched. VA loans, as they’re more commonly called, are available to home buyers and homeowners with U.S. military experience; as well as surviving spouses, in many cases.

The VA loan is available as a fixed-rate mortgage and as an adjustable-rate mortgage (ARM). Loan terms are typically 15 years or 30 years.

In order to qualify for a VA loan, mortgage applicants must show a minimum credit score — usually 620 — and have a Certificate of Eligibility (COE) from the Department of Veterans Affairs.

The Certificate of Eligibility document is often requested from the VA by your mortgage lender; and is delivered in fewer than 5 minutes.

Among all government-backed loan program, a group which include FHA loans, USDA loans and conventional mortgages via Fannie Mae and Freddie Mac, VA loans boast the lowest loan default rate. This is, in part, the effect of the VA’s “residual income” requirement on its home loans.

Residual income is the amount of money left over after a consumer has paid all of its monthly bills, inclusive of housing. The VA requires households to meet a minimum residual income requirement which varies based on location and household size.

2015 VA residual income requirements can be as low as $441 per household.

VA Interest Rate Reduction Refinance Loan (IRRRL)

The Department of Veterans Affairs “guarantees” of the loans in its VA Loan Guaranty program. In the event of default, the agency repays lenders a large portion of their potential loss.

For this reason, the VA has incentive to help its borrowers refinance to low mortgage rates when low mortgage rates become available. When homeowners pay less to their lenders each month, loan defaults are lower, all things equal.

One of the ways that the VA helps its homeowners to refinance is via the Interest Rate Reduction Refinance Loan (IRRRL).

More commonly called the VA Streamline Refinance, the IRRRL is among the simplest and fastest refinance programs available to today’s active homeowners. The IRRRL waives most usual mortgage documentation requirements.

Verify your new rate (Jul 18th, 2019)

With the IRRRL, a home appraisal is not performed; income documentation is not reviewed; credit scores are not pulled. The primary qualification for a VA Streamline Refinance is that the homeowner’s mortgage rate gets reduced.

However, there are even exceptions for that.

For homeowners switching from an ARM to a fixed-rate loan; or shortening their loan terms from, say, 30 years to 15 years, the VA will allow a mortgage rate increase and/or an increase in monthly payment.

The VA will also allow homeowners to increase their rate and payment if the new loan is used to finance energy-efficiency improvements to the home.

VA Streamline Refinance mortgage rates are currently available in the 3-percent range with very low APRs.

What Are Today’s VA Mortgage Rates?

VA mortgage rates are near their lowest levels since May. If you’re current mortgage is with the VA and you haven’t yet refinanced, consider a home loan refinance to today’s low rates.

Mortgage rates are available online at no cost, with no social security number required to get started, and with no obligation to proceed whatsoever.

Verify your new rate (Jul 18th, 2019)