One of the many benefits current and former service members may have is special financing through the Department of Veterans Affairs(VA). VA loans offer simple qualifying terms, low rates, and minimal equity requirements. VA loans do not require mortgage insurance nor PMI if you have less than 20 percent equity in your home. When buying a home, qualifying military personnel may not even need a down payment when working through the VA loan program.
When it's time to refinance, VA borrowers don't have to give up their current loan's benefits. The VA IRRRL – interest rate reduction refinance loan – program, sometimes also referred to as a "VA Streamline," lets them easily refinance their VA loan into a new one. Streamline loans usually require less paperwork and have easier credit requirements to qualify than the original loan did. Furthermore, the paperwork is minimal.
VA IRRRL Basics
Sometimes also called a "VA-to-VA" loan, the VA IRRRL is designed to let you refinance your veteran home loan to a new one and either lower your interest rate, transition from an adjustable-rate loan to a fixed-rate loan, or both. VA IRRRLs are designed to be easy to take out and close quickly. The VA IRRL program requires that there is a net benefit to the borrower either by reducing the loan payment* or getting the borrower out of an adjustable rate mortgage.
VA Requirements for an IRRRL
The stringent VA requirement to have your Certificate of Eligibility gets waived for an IRRRL. Since you had obtained one to get your original veteran home loan, it gets carried over to your IRRRL refinance loan. Disabled veterans may also qualify for a VA funding fee waiver.
The IRRRL only works when you refinance an existing VA home loan. Currently available only with fixed rates, you can choose any loan term from 10 to 30 years. So, if you're already seven years into a 30-year loan, you can simply refinance your loan for a 23- year term to stay on the same schedule. Thanks to its government guarantee, you can roll all of your closing costs into the new loan. The minimal out of pocket expense allows you to take advantage of the program to lower your monthly payment* or convert an adjustable rate loan into a fixed-term loan.
Choosing an VA IRRRL Lender
The VA doesn't limit your choice of lenders, provided the lender is VA approved. You don't have to use your current mortgage provider or servicer to refinance your existing VA home loan. It's always best to use a lender that is experienced with the VA IRRRL program as these guidelines do change frequently. The best way to ensure you have the most current information is to contact a lender experienced with VA home loans and find out what the VA requires.
Qualifying for the PennyMac IRRRL
When you take out an IRRRL through PennyMac, you get to take advantage of VA lending terms that help you get qualified quickly. The IRRRL can be for up to 100 percent of your home's value, but cannot exceed the original loan amount. Primary, second, and investments homes are eligible as long as the existing loan already has a VA home loan. There is no prepayment penalty on any of our loans plus we offer biweekly payment plan as a convenience for those who want to pay off their loan sooner.
The value gets calculated with a very basic appraisal. The program doesn't require the lender to calculate debt to income ratio and requires minimal documentation. The VA IRRL program's main requirement is no mortgage late payments in the last 12 months.
* By refinancing your existing loan, your total finance charges may be higher over the life of the loan.