If you’re a homeowner with a VA or FHA loan, at some point you may benefit from a mortgage refinance to lower your interest rate. When your interest rate decreases, your monthly mortgage payments can decrease as well. In the case of the FHA loan, a refinance may even reduce your mortgage insurance.
The VA and FHA loans both have a streamline refinance option that simplifies the process of refinancing a VA to VA or FHA to FHA loan. Here’s what you need to know about both streamline refinances:
The VA Interest Rate Reduction Refinance Loan (IRRRL)
An interest rate reduction refinance loan or IRRRL is the official name of the VA streamline refinance. Its purpose is to help you obtain a lower interest rate or refinance your adjustable-rate mortgage (ARM) into a fixed-rate mortgage.
The process of qualifying for an IRRRL is less complicated than applying for a VA loan the first time around.
Here are some notable differences between both application processes:
- You don’t need to obtain another certificate of eligibility (COE) to prove you’re qualified for the refinance
- You can use the COE from your original VA loan application
- A home appraisal isn’t required by the VA (Although your lender can choose to require an appraisal)
- The occupancy guidelines are less strict; you do not need to prove you will live in the home; you simply need to prove you lived in the home previously
The VA funding fee is still a requirement for this loan. Since the VA loan doesn’t require a down payment or private mortgage insurance, the funding fee is in place to offset the cost of the loan for taxpayers. The funding fee is due at closing, but you can avoid paying it out-of-pocket by financing the fee with your mortgage.
You don’t need to refinance your VA loan with the current lender, so shop around to find a loan with the most competitive terms. If you’re in need of a lender, we’re happy to help!
The FHA Streamline Refinance
Similar to the VA streamline refinance, the benefit of an FHA streamline refinance is it expedites the application and approval process. Less paperwork is necessary to qualify for an FHA streamline refinance. In fact, verifying your income, employment and credit may not be required for this refinance at all.
A home appraisal is not required by the Federal Housing Administration either. You may be able to obtain an FHA streamline refinance even if your mortgage balance exceeds the home value.
The qualifying criteria for this refinance is fairly lenient, but there are some basic guidelines. At least 210 days must pass from the closing of your original FHA loan before you can refinance. And you can’t get cash back from the mortgage.
With these minor details aside, the FHA streamline refinance presents an opportunity for borrowers with less than perfect credit or a mortgage that’s underwater.
*Atlantic Coast Mortgage, LLC is not affiliated with or acting on behalf of or at the direction of the VA, FHA, the Federal or State Government.