Posted on: October 3, 2018
While it’s the best product available for purchasing homes, the VA purchase loan does have some extra steps that can be hassle to anyone who isn’t prepared. Any veterans looking to get a refinance would understandably worry that the refinance process would be similar.
Depending on the type of VA refinance homeowners choose, they may not be required to do much work or preparation at all.
The VA streamline refinance, also known as the Interest Rate Reduction Refinance Loan (IRRRL), is the simplest of the two VA refinance options. Unlike the VA cash-out refinance, the IRRRL doesn’t require many documents.
The goal of the IRRRL is to save veterans money by lowering their interest rate. Not much preparation is needed before applying for an IRRRL, although homeowners may want to know what they’re getting in to before applying.
The IRRRL is known as the VA streamline refinance for a reason. Not much preparation is required from the veteran, especially compared to the VA purchase loan process.
With a streamline refinance, homeowners can essentially skip steps that other refinance loans may require. These, along with other benefits, are the primary reasons that veterans use the IRRRL:
Because every situation is different, some of these benefits may not apply to everybody. However, it’s safe for most VA homeowners to assume that they won’t need to provide much documentation and will save money on monthly payments in the process.
Recently, the United State government has added restrictions for some lenders regarding the IRRRL. This is to protect the homeowner from being taken advantage of. However, it is recommended that anyone looking to get a VA streamline refinance gets connected with multiple lenders since the rate and terms of the refinance can vary.
Anyone looking to get an IRRRL should know that not every VA member is eligible. For starters, the home must have been purchased with a VA loan. This is one of the requirements that separates the IRRRL from the VA cash-out refinance. The VA cash-out can be used by any VA eligible members regardless of what product they used to purchase their current home.
Also, the VA does require that homeowners are reducing their mortgage rate with the IRRRL. With how much lower current refinance rates are than mortgage rates were a decade ago, many current homeowners shouldn’t have any trouble meeting this requirement.
There are ways for VA homeowners to get around the reduced rate requirement. Someone who used an adjustable rate mortgage (ARM) may be eligible for the IRRRL even though their rate is increasing.
The IRRRL is supposed to save homeowners money by reducing their mortgage rate. Unlike the VA cash-out refinance, though homeowners don’t get any of that money. Prior to deciding to use a VA IRRRL, veterans should decide if the IRRRL is better for their situation than the cash-out refinance – or if either are the right decision at the moment.
Also, homeowners shouldn’t feel pressured by their lender to get a refinance. Other lenders can offer better terms, and homeowners should only get a refinance if they want.
So, the most important part of preparing for a streamline refinance is deciding if the program is right for you. After, It’s recommended that you shop with multiple lenders to ensure that you’re getting the best deal on your loan.