VA IRRL Home Loan Refinance: Convert ARM to Fixed Rate

The VA offers loan guarantee programs that have made housing more affordable for so many veterans of our Armed Services.  If you have a VA home loan, we might be able to save you some money.

Introducing...the "streamlined" VA Interest Rate Reduction Loan.  If you have a VA home loan, you can refinance without an appraisal or income verification.  From the VA website:

WHAT IS AN IRRL?

An IRRL is a new VA-guaranteed loan made to refinance an existing VA-guaranteed loan( thus VA Streamline Loan), generally

• at a lower interest rate than the existing VA loan, and
• with lower principal and interest payments than the existing VA loan.
  

Generally, no appraisal, credit information or underwriting is required on an IRRL, and any lender may close an IRRL automatically.

INTEREST RATE DECREASE REQUIREMENT

An IRRL (which is always fixed rate) must bear a lower interest rate than the loan it is refinancing unless the loan it is refinancing is an Adjustable-Rate Mortgage (ARM).

The principal and interest payment on an IRRL must be less than the principal and interest payment on the loan being refinanced unless one of the following exceptions applies:

• The IRRL is refinancing an ARM
• the term of the IRRL is shorter than the term of the loan being refinanced, or
• energy efficiency improvements are included in the IRRL
  

A significant increase in the veteran's monthly payment may occur with any of these three exceptions, especially if combined with one or more of the following:

• financing of closing costs
• financing of up to 2 discount points
• financing of the funding fee, and/or
• higher interest rate when an ARM is being refinanced.
  

If the monthly payment (PITI) increases by 20 percent or more, the lender must

• determine that the veteran qualifies for the new payment from an underwriting standpoint; such as, determine whether the borrower can support the proposed shelter expense and other recurring monthly obligations in light of income established as stable and reliable, and
• include a certification that the veteran qualifies for the new monthly payment which exceeds the previous payment by 20 percent or more.