Shopping around not only finds you a lender that will approve your loan, but also one that offers the best rates and closing costs.įiled Under: VA IRRRL Guidelines Tagged With: net tangible benefit, refinance savings, va irrrl benefit proof
You have some workaround with the lender, though, as you are free to go to any lender that is available. The bottom line is that it comes down to your circumstances and the lender’s requirements. Lenders, however, may require that you verify your income and/or liabilities to make sure you truly can afford the higher payment.
Again, the VA only requires lenders to verify your income if the payment increases more than 20%. While it is a lower risk, the higher payment could be harder to afford. Some lenders may be a little more hesitant to write this type of loan.Ī similar situation occurs with a borrower that refinances from a 30-year to a shorter term. The VA does not require lenders to verify your income or debt ratio unless that payment increases more than 20%. If you refinance out of that ‘teaser’ rate, chances are you will experience a payment increase. They offer a ‘teaser’ rate that then adjusts after the initial period. ARM rates are often lower than fixed loan rates.
First, the payment may be slightly higher. However, a borrower refinancing from an ARM to a fixed rate loan may pose a slightly higher risk. The lender does not have to take a lot of risk since the payment is lower and you have a track record of making your payments on time. It depends on the risk you pose.įor example, if you have a payment reduction benefit, chances are lenders will allow you to refinance with a perfect mortgage payment history. This doesn’t mean a lender will not do these things, though.
The VA does not require them to pull your credit, verify employment or income or even order an appraisal. The bigger question you may want to know is what lenders require. Since the mortgage payment history isn’t enough to rely on, the lender must also determine the benefit of the loan. The VA does allow the exception of one 30-day late payment in that time, but it cannot be within the last three months.Īside from the mortgage payment history, the lender does not have to verify your income, assets, credit score, or home value. During that time, all payments must be made on time. They base their decision on your mortgage payment history and the ‘net tangible benefit.’Īs far as your mortgage payment history, the lender must evaluate your payments over the last 12 months.
The VA requires very little verification when you use the VA IRRRL program. Why the VA Cares About Net Tangible Benefit Yes, your payment increases, but you cut out thousands of dollars in interest by paying the loan off in half of the time. For example, if you have a 30-year term now, but you use the VA IRRRL to secure a 15-year term, you save money. If you refinance from an ARM to a fixed-rate, though, you reduce the risk and this is a benefit.Īnother form of a risk reduction benefit is when you refinance from a longer term into a shorter term. If you can’t afford the new payment, you could default on your loan. If you keep it and let it adjust, your payment could increase significantly. Let’s say you have an adjustable rate loan right now. But, there are also other ways.Īnother popular way to achieve the benefit is with risk reduction. Yes, a lower payment is definitely a benefit and an easy way to qualify for the loan. There are many ways you can show a ‘net tangible benefit.’ In the loosest sense of the term, it means you save money by refinancing. Looking for Current Mortgage Interest Rates? Click Here. What’s the catch? You need a ‘net tangible benefit.’ In other words, there needs to be incentive for the VA to allow you to refinance without re-qualifying for the program. This means refinancing with no verification of your credit, income, assets, or home value. If you have a current VA loan, you may be eligible to refinance with the VA IRRRL.