Call or email me for more information on how these programs may be of benefit to you.
Mary 602-206-9081 mmartin@swdmtg.com
VA Interest Rate Reduction Refinance Loan
The VA Interest
Rate Reduction Refinance Loan (IRRRL) lowers your interest rate by refinancing
your existing VA home loan. By obtaining a lower interest rate, your monthly
mortgage payment should decrease. You can also refinance an adjustable rate
mortgage (ARM) into a fixed rate mortgage.
IRRRL Facts
•No appraisal or credit underwriting package is required
when applying for an IRRRL.
•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.
•When refinancing from an existing VA ARM loan to a fixed
rate loan, the interest rate may increase.
•No lender is required to give you an IRRRL, however, any
VA lender of your choosing may process your application for an IRRRL.
•Veterans are strongly urged to contact several lenders
because terms may vary.
•You may NOT receive any cash from the loan proceeds.
Eligibility
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.
Additionally:
•A Certificate of Eligibility (COE) is not required. If
you have your Certificate of Eligibility, take it to the lender to show the
prior use of your entitlement.
•No loan other than the existing VA loan may be paid from
the proceeds of an IRRRL. If you have a second mortgage, the holder must agree
to subordinate that lien so that your new VA loan will be a first mortgage.
•You may have used your entitlement by obtaining a VA
loan when you bought your house, or by substituting your eligibility for that
of the seller, if you assumed the loan.
•The occupancy requirement for an IRRRL is different from
other VA loans. For an IRRRL you need only certify that you previously occupied
the home.
Application Process
A new Certificate of Eligibility (COE) is not required.
You may take your Certificate of Eligibility to show the prior use of your
entitlement or your lender may use our e-mail confirmation procedure in lieu of
a certificate of eligibility.
Loan Limits
VA does not set a cap on how much you can borrow to
finance your home. However, there are limits on the amount of liability VA can
assume, which usually affects the amount of money an institution will lend you.
The loan limits are the amount a qualified Veteran with full entitlement may be
able to borrow without making a down payment. These loan limits vary by county,
since the value of a house depends in part on its location.
The basic entitlement available to each eligible Veteran
is $36,000. Lenders will generally loan up to four times a Veteran's available
entitlement without a down payment, provided the Veteran is income and credit
qualified and the property appraises for the asking price. See Loan Limits for
more information about the limits in your county.
VA Funding Fee
Generally, all Veterans using the VA Home Loan Guaranty
benefit must pay a funding fee. This reduces the loan's cost to taxpayers
considering that a VA loan requires no down payment and has no monthly mortgage
insurance. The funding fee is a percentage of the loan amount which varies
based on the type of loan and your military category, if you are a first-time
or subsequent loan user, and whether you make a down payment. You have the
option to finance the VA funding fee or pay it in cash, but the funding fee
must be paid at closing time. You do not have to pay the fee if you are a:
•Veteran receiving VA compensation for a
service-connected disability, OR
•Veteran who would be entitled to receive compensation
for a service-connected disability if you did not receive retirement or active
duty pay, OR
•Surviving spouse of a Veteran who died in service or
from a service-connected disability.
The funding fee for second time users who do not make a
down payment is slightly higher. Also, National Guard and Reserve Veterans pay
a slightly higher funding fee percentage. See Loan Fees for more information
about loan costs. Some lenders offer IRRRLs as an opportunity to reduce the
term of your loan from 30 years to 15 years. While this can save you money in
interest over the life of the loan, you may see a very large increase in your
monthly payment if the reduction in the interest rate is not at least one
percent (two percent is better). Beware: It could be a bigger increase than you
can afford.
Streamline Your FHA Mortgage
FHA has permitted streamline refinances on insured mortgages
since the early 1980s. “Streamline refinance” refers only to the amount of
documentation and underwriting that the lender must perform, and does not mean
that there are no costs involved in the transaction. The basic requirements of
a streamline refinance are:
The mortgage to be refinanced must already be FHA insured.
The mortgage to be
refinanced should be current (not delinquent).
The refinance results
in a lowering of the borrower's monthly principal and interest payments, or,
under certain circumstances, the conversion of an adjustable rate mortgage
(ARM) to a fixed-rate mortgage.
No cash may be taken out on mortgages refinanced using the
streamline refinance process.
Lenders may offer
streamline refinances in several ways. Some lenders offer "no cost"
refinances (actually, no out-of-pocket expenses to the borrower) by charging a
higher rate of interest on the new loan than if the borrower financed or paid
the closing costs in cash. From this premium, the lender pays any closing costs
that are incurred on the transaction. FHA does not allow lenders to include
closing costs in the new mortgage amount of a streamline refinance.
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