What are the Underwriting Requirements for VA IRRRL?

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The VA Interest Rate Reduction Refinance Loan (IRRRL), otherwise known as the VA Streamline Refinance, is one of the best refinance programs available today. To get its refinancing benefits, you don’t need to get through the usual refi hassle as you do with traditional mortgages. There is no required income verification, nor an appraisal. The VA does not also require their lenders to pull borrower credit records to determine eligibility. You just need to have an existing VA loan to refinance via the program.

But that doesn’t mean there is no underwriting that will occur. In this article, we will discuss the underwriting requirements so you can prepare well for your VA Streamline Refinance.

Our lenders can answer your questions about VA loans here.

Credit Score Requirements

 

Lenders are not strictly required by the VA to check your credit score. However, many of them do not follow this rule to the book and still proceed to check whether your score is favorable or not. This helps them ensure that you are a responsible borrower and therefore, a good risk.

Oftentimes, those who do have legit reasons to do so, such as when:

a) you are 30 days late or more on your current VA loan payment; and

b) your refi arrangement will result into a 20 percent increase in your loan payment

If you refinance from an adjustable-rate mortgage to a fixed-rate arrangement, it’s often understandable for your payment to increase especially when you refi before the loan’s reset period which typically carry very low interest rates.

Your Mortgage Payment History

Your lender will check on your mortgage payment history to see if you’ve ever had late payments, and if these late payments had been 30 days or so in delay. Experts advise that in order to secure an approval, you need to have a good payment record, else you might have to wait for some time for this late record to go beyond the 12-month observation period before you push through with your refi.

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The Resulting Refi Arrangement

In line with the program’s main purpose, your resulting refinance loan should contain a lower interest rate with a lower principal amount, resulting in lower monthly payments. The exceptions are only when:

a) you will refinance into another adjustable-rate mortgage and your payment increases, but is still less than the 20 percent cap

b) you refinance into a new loan with a shorter term but the resulting increase is still less than the 20 percent limit

On Occupancy

You don’t need to prove to the lender that you will use the home as your primary residence, unlike when you first took out your original VA mortgage. What you need to show, instead, is that you lived in the property before your time of application.

Many veterans and military servicemembers take advantage of this feature to turn their current home into rental properties, especially for those who are reassigned locations.

Maximum Amount Loanable

The VA does not place limits as to how much you may borrow via the refinance, as long as you still satisfy the main conditions of the loan. You cannot, however, expect to take out a portion of the loan as cash.

A Signed Disclosure

This document contains your signature, certifying that you agree to the resulting arrangement of the refinance – its terms, rates, and agreements on repayments.

You are not restricted to refinancing with your current lender. Feel free to shop around and compare rates.

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