VA IRRRL Streamline Refinance

As with any home loan, you would ideally begin by talking to a Pennymac Loan Expert to go over your options and savings potential, such as whether today's rates would provide you with enough benefit to qualify you for the VA IRRRL, or whether refinancing into a fixed-rate loan from a current ARM would be beneficial for you at this time. Once that has been decided, applying for a streamline refinance is the quickest and easiest way to take advantage of any favorable home loan terms available to you. In the majority of cases, this refinance can be done without an appraisal or income verification, and you typically have the option to roll any closing costs into the new loan balance, reducing or entirely eliminating any out-of-pocket expenses.

There are several reasons why you may want to take advantage of a VA streamline refinance if you have a current VA home loan:

Lower your interest rate. The most common reason to opt for a VA IRRRL is to refinance into a lower interest rate. Simply put, a lower rate would decrease the interest you pay every month, and reduce your monthly mortgage payment. That said, if you decide you'd like to take advantage of lower rates while also reducing the years of your term to pay off your loan faster (e.g., going from a 30-year to a 15-year loan), you would pay less interest over the life of the loan but your actual monthly payment could go up.

Stabilize your monthly payments. Many homeowners use a VA IRRRL to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. Especially during timely market conditions that are offering favorably low rates, making this move to secure a low rate for the remainder of your mortgage can provide not only savings, but stability and overall peace of mind.

Refinance on your own terms. While refinancing to a new 30-year fixed VA loan is the most popular option due to the immediate boost in monthly savings, you may have the option of maintaining an odd loan term if you don't want to extend your payoff timeline but still want to take advantage of a lower interest rate available. Remember too that if you do opt to extend your term to a new 30-year loan, you will always have the flexibility to make extra payments toward your principal balance on any given month, therefore reducing your interest paid but only on the months you feel comfortable spending a little extra to accomplish that long-term goal. If you are someone who wants to refinance to a lower rate but are concerned with extending the years of your loan term, this latter option would provide you with the most flexibility on a monthly basis.

To be eligible for a VA Streamline Refinance from Pennymac, you must meet the following requirements:

• Hold an existing VA loan
• Have made your last three loan payments on time
• Demonstrate a net tangible benefit: the interest rate on your new loan must be lower than the rate on your existing loan, unless you are refinancing from an adjustable rate to a fixed-rate mortgage

The VA loan funding fee is a one-time payment made to the Department of Veterans Affairs when a new VA loan is originated. The fee is used to support the continued offering of VA home loan benefits to the military community, as well as reduce any burden on taxpayers should a borrower default on a VA loan. The loan type will in part dictate how much the fee will be. In the case of a VA IRRRL, most require a 0.5% funding fee, which should be less than the original fee paid upon the purchase of the property. Typically you will have the option of rolling the cost of this fee into the loan balance, spreading it out over the life of the loan. Some service members are exempt from paying this fee for the remainder of their lives. If you are not sure of your own exemption status, your Certificate of Eligibility should state whether you are eligible.

A VA IRRRL is structured purely to accommodate the simple reduction of your existing VA loan interest rate or to replace an ARM with a fixed-rate loan. If you are a current VA homeowner and would like to borrow against your available home equity to receive cash, a VA cash-out refinance would be the refinance loan to apply for. Talk to a Pennymac Loan Expert to learn more and see if you qualify. You may also want to explore conventional cash-out refinance options.

Although a VA IRRRL is usually a faster, easier alternative to standard mortgage refinancing, it does follow a similar set of steps. To get a VA IRRRL, you'll need to do the following:

1. Choose a lender. The US Department of Veterans Affairs backs all VA loans, but they are not the ones who provide them. Just as you did when you bought your home, to refinance your VA loan you'll need to go through a mortgage lender. Although the VA IRRRL can help reduce closing costs and other expenses, there may still be terms and fees associated with specific lenders. As such, it's advisable that you shop around to get a feel for what options will best meet your needs and your budget. As a top VA lender in the nation, Pennymac offers competitive interest rates for VA IRRRLs so you can be sure that you're getting the best solution for your situation.
2. Provide your documentation. Once you've selected a lender, you will need to provide some documentation. This includes your Certificate of Eligibility (COE) that you obtained in order to secure your original VA loan. The lender may also obtain a copy of this certificate electronically through the Department of Veterans Affairs. Your lender will let you know if there is any other specific documentation you will need to provide to secure your VA IRRRL.
3. Finalize the loan. The loan process may differ slightly from lender to lender, and you may be required to pay a one-time VA funding fee. The good news is that because VA loans do not require down payments or mortgage insurance, closing costs should still be much lower than they would be for a traditional loan. You will also have the option of rolling your closing fees into the loan, rather than paying those costs upfront.

Wondering if a VA IRRRL is right for you? Talk to a Pennymac Loan Expert to explore all of your refinancing options today.