One of the least understood home loans options offered through the VA is the Interest Rate Reduction Refinance Loan, or IRRRL. An IRRRL can lower your interest rate by refinancing your current VA home loan.
Here are just a few facts about an IRRRL:
- No appraisal or credit check is required
- Closing costs can be rolled into the new loan
- Any VA lender can perform an IRRRL, however many don’t
- IRRRL’s are not available for cash-out refinances
- No impact on your VA entitlement for future loans
Eligible for an IRRRL?
There are a few requirements associated with Interest Rate Reduction Refinance Loans. For instance, you must be refinancing a current VA loan. IRRRLs through the VA cannot be used to refinance a conventional home loan.
When applying for an IRRRL, you do not need a new Certificate of Eligibility since it is refinance your old VA loan. Your prior COE is sufficient. Also, for an IRRRL, you must be able to prove that you live in the home.
IRRRL loan limits
The VA does not put limits on the amount of money a homeowner can borrower, however, many lending institution will have their own limits. Plus, there are limits to the amount of liability the VA is willing to take on with any given loan. These limits are the amount of money the VA is willing to insure without requiring a down payment from the borrower.
An IRRRL has a funding fee
Like all VA loans, IRRRLs come with the standard VA funding fee. This fee helps mitigate the risk for taxpayers since VA loans require no down payment. This funding fee is typically a percentage of the loan amount and can be rolled into the new loan, so no up-front money need change hands.
There are a few exemptions to the VA funding fee. The follow are not required to pay a VA funding fee:
- Veterans receiving compensation for a service-related disability
- Veterans who would otherwise be receiving compensation for a service-related disability if they were not current receiving military retirement or active duty pay
- The surviving spouses of veterans who received a service-related disability
For more information on Interest Rate Reduction Refinance Loans from the VA, contact us today at (888) 320-7888.
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