VA Streamline Refinancing Rules

VA Interest Rate Reduction Refinancing Loans (also called VA Streamline Loans or VA IRRRLS) are different than other types of refinancing--there is no money back to the borrower permitted (unless a refund is due) and a VA IRRRL is designed specifically for cutting a homeowner’s monthly payments, lowering the mortgage loan interest rate, or both at the same time. VA IRRRLs don’t require an appraisal because the loan is not based on the home’s current value. A lender may require a new appraisal regardless which is permitted under the VA loan rules.

VA Streamline loans are unique when compared to home equity loans, reverse mortgages, and conventional cash-out refinance loans. Because of the nature of the Streamline/IRRRL program there regulations VA loan applicants should think about when reviewing the options for a home loan refinance.

According to the VA official site at www.VA.gov, “Generally, the party(ies) obligated on the original loan must be the same on the new loan (and the veteran must still own the property).” 

But there will be situations where there is a possible change in “obligors” on the VA home loan. What does the VA official site say about these circumstances? “The lender should contact VA regarding a proposed IRRRL involving a change in obligors unless the acceptability of the IRRRL is clear.”  Sample cases are provided on the VA official site to help guide the lender through the process.

Those samples include situations where a military member and spouse divorce, the non-military spouse is keeping the home and wants to refinance the VA home loan. According to VA loan rules, “The spouse cannot get an IRRRL unless the veteran agrees to be obligated on the new loan and commit his or her entitlement to the new loan.  A person without entitlement cannot get an IRRRL or any other type of VA loan.”

It’s important to point out that the rules in such cases are different for surviving spouses of military members who have died--surviving spouses should contact the Department of Veterans Affairs for assistance in these circumstances to learn what their rights and obligations may be. However, it should be known that in general, when the veteran and spouse were obligated on the original VA loan, the surviving spouse can apply for a VA IRRRL.

A divorced veteran and a new spouse can be obligated on the new IRRRL, as can a veteran who took out a joint VA loan with non-veterans and wants to refinance the property alone.

 

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