The VA IRRRL program, also known as the VA Interest Rate Reduction Refinance Loan, or VA Streamline refinance, is very popular as we start 2015. With interest rates hitting two year lows at the beginning of the year Orange County VA borrowers are able to take advantage of the rate drop by utilizing the IRRRL program. The IRRRL is the easiest type of refinance a homeowner will ever go through, which is why many VA borrowers may refinance more than once if interest rates continue to drop.
FAQ’s for the VA IRRRL Program
Q: Who is Eligible for a VA IRRRL? Anyone that currently has a VA loan is able to refinance using the IRRRL program if they are lowering their interest rate and payment. While there are a few rules and guidelines, generally whoever is currently on the VA loan must also be on the new VA loan.
Q: How difficult is the loan process? The loan process is extremely easy, especially when compared to the loan processing involved in initially getting a loan to buy a home. With the IRRRL program there is no income documentation and no appraisal. The lender will most likely need to verify that at least one of the borrowers has a job, but income is not verified. No tax returns, paystubs, etc. A credit report is run, but primarily just for the mortgage rating and FICO score. A borrower’s FICO score will have some bearing on the interest rate of the new loan, but some lenders will allow FICO scores as low as 580, while some may make an exception for FICO scores lower than 580.
Q: How much does it cost to do an IRRRL? It depends. Many lenders will offer “No Cost” options, where a lender credit is used to cover the closing costs. It is even possible to get enough lender credit to cover the new impound account. But it is also possible to choose a lower interest rate and have closing costs added into the new loan amount. It is important to carefully review each of these options and make sure you are choosing the best IRRRL loan scenario based on your long and short term financial goals. For example, if you think you may move from your home within the next few years, then it would probably make more sense to go with a No Cost scenario, where the breakeven is immediate, versus a scenario with closing costs where the breakeven could be several years out. A good VA IRRRL Lender should be able to prepare loan scenarios and a Side by Side Total Cost Analysis to make sure you see the pro’s and con’s of each option.
Q: How long does it take to close an IRRRL? This depends on the lender. It also depends on how quickly the borrower sends the initial signed paperwork back to the lender. The typical time period to close a VA IRRRL is less than three weeks.
Q What happens to the impound account/escrow account on my current VA loan? After the IRRRL refinance closes your old lender will refund the balance of your impound account back to you. Normally they will send a check that should be received within 30 days of the closing. It is important to realize that as part of the new loan a new impound account for taxes and insurance is set up. The borrower has the option of bringing in money for the new impound account or financing the new impound account into the loan. Either way, they will be receiving a refund of the old impound account after closing, which will act as a reimbursement of the impound account they just set up.
How Do I Know if Interest Rates are Low Enough to do an IRRRL?
You will probably know it’s worth some investigation into the IRRRL program if you are receiving an influx of advertisements in the mail. And of course if the media begins talking about a drop in interest rates then it may be worth a look. Many of the advertisements sent in the mail can be very deceptive, offering extremely low interest rates that may or may not be available, and at a huge cost. For the lenders advertising in this manner it can work if it just generates a phone call. But working with a lender that pulls in VA IRRRL phone calls in this manner is not where your rate shopping should end, because not all lenders are the same. It is important to talk to a local Orange County VA loan specialist who can prepare a custom Side by Side Total Cost Analysis, which will give a thorough breakdown of several IRRRL scenarios compared to your current loan. Going through this type of Analysis can save you thousands of dollars by helping you to make sure you are choosing the right loan scenario.
Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loans. MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com. I will prepare custom VA IRRRL loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.