By Debbie Gregory.
The Department of Veterans Affairs (VA) strives to help servicemembers, veterans, and eligible surviving spouses obtain home loans so that they may become homeowners.
A VA loan provides a home loan guaranty benefit and other housing-related programs to help buy, build, repair, retain, or adapt a home for personal occupancy. These loans are obtained through private lenders such as banks and mortgage companies. The VA guarantees a portion of the loan, enabling the lender to provide more favorable terms.
A VA Streamline (also known as Interest Rate Reduction Refinance Loan, or by its acronym IRRL ) is a refinance opportunity that enables refinancing of a VA Loan to a lower rate, or from an adjustable rate to a fixed rate. When deciding on refinancing, it’s important to determine whether it is beneficial to do so. The general rule of thumb is that if you can refinance and reduce your interest rate by 1% then it is something worth considering. However, it’s important to consider other factors, such as closing costs and how long you plan on living in the property.
An IRRRL can only be made to refinance a property on which you have already used your VA loan eligibility. It must be a VA to VA refinance, and it will reuse the entitlement you originally used.
An IRRRL may be done with “no money out of pocket” by including all costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs. But there is no opportunity to receive any cash out from the loan proceeds.
The occupancy requirement for an IRRRL is different from other VA loans. When you originally got your VA loan, you certified that you occupied or intended to occupy the home. For an IRRRL you need only certify that you previously occupied it.
The loan may not exceed the sum of the outstanding balance on the existing VA loan, plus allowable fees and closing costs, including funding fee and up to two discount points. You may also add up to $6,000 of energy efficiency improvements into the loan.