VA Streamline Refinance IRRRL Guidelines and Credit Requirements

At Lendia, we offer the VA Streamline refinance, officially called the Interest Rate Reduction Refinance Loan (IRRRL), to veterans who already have a VA loan. In most cases it needs no appraisal and very little paperwork. The loan must lower your rate, or move you from an adjustable rate to a fixed rate, and it cannot pay you cash at closing.

Quick facts

• Minimum credit score: 580 for loans up to $1,000,000. Larger loans generally need a higher score, commonly 660 to 700 or more depending on the loan amount. You also cannot have any 30-day mortgage lates in the past 12 months.
• Funding fee: 0.50% of the loan amount, unless you are exempt. It can be added to the loan.
• Appraisal: not required in most cases.
• Occupancy: you must live in the home now, or certify that you lived in it before.
• Cash out: none. If you want cash, see our VA cash-out refinance guidelines.

Who can qualify

Generally the people on the new loan must be the same as on the old VA loan, and the veteran must still own the home. When the borrowers change, we may need to qualify the new borrower on credit and income. The table shows the common cases.

Rate, timing and payment rules

• Seasoning: the new loan can close only after the later of 210 days from your first payment date on the old loan and 6 monthly payments made.
• Payment history: no 30-day late mortgage payments in the past 12 months. If you had one, call us. We may be able to qualify you with income documents.
• Fixed to fixed: the new rate must be at least 0.50% lower.
• Fixed to adjustable: the new rate must be at least 2.00% lower.
• Adjustable to fixed: the new rate does not have to be lower, because the benefit is a stable payment.
• Recoupment: your closing costs and fees must be earned back through your lower payment within 36 months.
• Maximum loan term: the term of the old loan plus 10 years, up to 30 years and 32 days. For example, a 15-year loan can be refinanced into a term of up to 25 years.

What the new loan can include

• The payoff of your existing VA loan
• Any late charges and unpaid interest
• Allowable closing costs and fees, including up to two discount points
• The VA funding fee

You can roll these into the loan, which means you can often refinance with no money out of pocket. The new loan is still limited by the value of the home and VA rules, and we confirm this on your specific loan.

VA funding fee and exemptions

The funding fee on an IRRRL is 0.50% of the loan amount. You do not pay it if you are exempt. You are exempt if you:

1. Receive VA compensation for a service-connected disability.
2. Would receive that compensation if you did not receive military retirement pay.
3. Are the surviving spouse of a veteran who died in service or from a service-connected disability.
4. Are on active duty awaiting discharge and have been rated eligible for compensation after a pre-discharge exam.
5. Are entitled to VA compensation but are not currently receiving it because you are on active duty.

Appraisal and property

At Lendia, we do not require an appraisal on most IRRRLs. We run our own automated valuation, and in some cases we may ask for an exterior-only appraisal. No termite inspection is required on an IRRRL. The home cannot be held in an irrevocable trust, and these property types are not eligible:

• Mobile homes
• Mixed-use properties
• Properties with more than four units
• Manufactured condos
• Bed and breakfast properties
• Farms, orchards or ranches that produce income

When we need to verify your income

Most IRRRLs need no income documents. At Lendia, we verify income when:

• Your new payment of principal, interest, taxes and insurance is more than 20% higher than your current payment. This can happen when you shorten the term or move from an adjustable rate to a fixed rate.
• You had a 30-day late mortgage payment in the past 12 months.
• Your recoupment period is longer than 36 months.

When we verify income, we can use salary and wages, self-employment, military pay, part-time or seasonal work, rental income, alimony and child support, Social Security, retirement and pension, disability, interest and dividends, and other documented sources.

Residual income (when we verify income)

Residual income is what is left of your monthly income after taxes, debts and housing costs, to cover food, health care, clothing and gas. The VA sets a minimum by loan size, family size and region. Count everyone who lives in the household and depends on you for support. These are the California (West region) minimums. Active-duty and retired service members who live near military facilities may qualify for a reduction of at least 5%.

Loan amounts of $79,999 and below

Loan amounts of $80,000 and above

If your debt-to-income ratio is 41% or higher, the residual income you need is 120% of these amounts.

Documents for a VA Streamline refinance

Most borrowers (no income verification)

• Name, address and phone number, and previous addresses for the past 2 years
• Date of birth and Social Security number for each borrower, so we can check credit
• A valid photo ID
• Your homeowner’s insurance agent’s name and contact information, or your insurance declarations page
• Your homeowner’s association name and phone number, if you have one

If we need to verify income

• 30 days of pay stubs and your last 2 years of W-2s and federal tax returns
• If self-employed: your last 2 years of federal tax returns with all schedules
• Social Security, pension or retirement award letters, if you receive that income
• Two months of bank and retirement account statements
• A divorce decree and settlement papers, if they apply
• An explanation and supporting papers for any negative item on your credit

Have questions? Call a Licensed Lendia California Loan Officer at 949-333-4636, or request a rate quote and we will get back to you today.