The Veteran Affairs have the most lenient home loans in the market. The VA has both home purchase loans and refinance loans. Once the rates decrease, the veteran may choose to refinance their mortgage. This way, the monthly payments towards your mortgage is reduced.
One of the refinance options on the VA program is the Interest Rate Reduction Refinance Loan or the IRRRL. With fewer documents to verify, a veteran may able to refinance their home loans. Because the process is streamlined, it is quicker than the other refinance options.
To make the most out of the VA IRRRL, try these few tips before you apply for a refinance.
Work on Your Employment
Have a stable job. A stable employment means a lesser risk to lenders than someone who hops from one job to another. If you are considered ‘low risk’, there is a better chance for you to secure a lower interest rate.
If you have been in the same job for many years, this will reflect a consistent and stable income source. If finding another job is inevitable, try to stay in the same industry. This will do you lesser harm than completely changing industries.
Find a loan that fits your financing needs.
Fix Your Mortgage History
Your lender will look at your mortgage history. Yes, it is true that there is very little verification in a
VA IRRRL. However, your mortgage history is something that lenders would want to look closely.
Because there are limited documents for lenders to base their calculations on, they will have to scrutinize your history. The consistency in your payments, or the inconsistencies there of, will greatly affect the approval of the loan. In the same manner, this will greatly tell what interest rate will apply for the new loan.
If you are considering to refinance, you cannot have any late mortgage payments for the last 12 months. So, if you are aiming to lower your rates significantly make sure you focus on paying your dues on time.
Pay the Funding Fee and Closing Cost
If you refinance through the VA program, you can never get rid of the
VA funding fee. There are two ways to take care of that. First, you may pay it out-of-pocket at closing. The other way is to have it rolled into the loan. If you so choose, you may also include the closing cost.
However, if you choose to roll these fees, the lenders may have to take your outstanding principal balance and add the funding fee and closing cost to determine the loan amount. If you pay for the closing cost and the funding fee, you may get a lower interest rate.
Yes! Shopping around will help you find the best IRRRL rate. Some lenders may offer a slightly lower rate than others. If you stick to just a few sources, you may miss out on the chances of finding better rates. You can shop online, check with your current lender or look for other lenders. Comparing their offers and rates will help you decide which one is best for your case.
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