IRRRL stands for Interest Rate Reduction Refinancing Loan. You may see it referred to as a “Streamline” or a “VA to VA.” Except when refinancing an existing VA guaranteed adjustable rate mortgage (ARM) to a fixed rate, it must result in a lower interest rate. When refinancing from an existing VA ARM loan to a fixed rate, the interest rate may increase.

No appraisal or credit underwriting package is required by VA. You should be aware, however, that lenders may require an appraisal and credit report anyway.

A certificate of eligibility is not required. Your lender may use our e-mail confirmation procedure for interest rate reduction refinance in lieu of a certificate of eligibility.

An IRRRL may be done with “no money out of pocket” by including all costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs. (Remember: The interest rate on the new loan must be lower than the rate on the old loan unless you refinance an ARM to a fixed rate mortgage).

No lender is required to make you an IRRRL, however, any lender of your choice may process your application for an IRRRL. While it might be the best place to start shopping for an IRRRL, you do not have to go to the lender you make your payments to now or to the lender from whom you originally obtained your VA Loan.

Veterans are strongly urged to contact several lenders. There may be big differences in the terms offered by the various lenders you contact.

Some lenders may contact you suggesting that they are the only lender with authority to make IRRRLs. Remember – Any lender may make you an IRRRL.

Some lenders may say that VA requires certain closing costs to be charged and included in the loan. Remember – The only cost required by VA is a funding fee of one-half of one percent of the loan amount which may be paid in cash or included in the loan.

You must NOT receive any cash from the loan proceeds.

An IRRRL can be done only if you have already used your eligibility for a VA loan on the property you intend to refinance. It must be a VA to VA refinance, and it will reuse the entitlement you originally used. You may have used your entitlement by obtaining a VA loan when you bought your house, or by substituting your eligibility for that of the seller, if you assumed the loan. If you have your Certificate of Eligibility, take it to the lender to show the prior use of your entitlement.

The occupancy requirement for an IRRRL is different from other VA loans. When you originally got your VA loan, you certified that you occupied or intended to occupy the home. For an IRRRL you need only certify that you previously occupied it.

The loan may not exceed the sum of the outstanding balance on the existing VA loan, plus allowable fees and closing costs, including funding fee and up to 2 discount points. You may also add up to $6,000 of energy efficiency improvements into the loan.

NOTE: Adding all of these items into your loan may result in a situation in which you owe more than the fair market value of the house, and will reduce the benefit of refinancing since your payment will not be lowered as much as it could be. Also, you could have difficulty selling the house for enough to pay off your loan balance.

Some lenders offer IRRRLs as an opportunity to reduce the term of your loan from 30 years to 15 years. While this can save you a lot of money in interest over the life of the loan, if the reduction in the interest rate is not at least one percent (two percent is better) and lots of new loan costs are rolled into the new loan, you may see a very large increase in your monthly payment.

Beware: It could be a bigger increase than you can afford

No loan other than the existing VA loan may be paid from the proceeds of an IRRRL. If you have a second mortgage, the holder must agree to subordinate that lien so that your new VA loan will be a first mortgage.

Q: What is a VA Guaranteed Home Loan?

A: VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you fail to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.

Q: What is pre-purchase counseling and why is it helpful?

A: Pre-purchase counseling gives a person information on (1) the process of buying a home, (2) the key players in the home buying process, and (3) debt management. The goal is to create a better informed homebuyer. While VA does not require such counseling, we strongly recommend it. There is usually no charge for the housing counseling. An excellent online source of information for first time homebuyers is provided by Ginnie Mae.

To locate a housing counseling office call (800) 569-4287 or visit HUDs website. The Department of Housing and Urban Development (HUD) maintains both the phone number and website.

Q: Does my entitlement guarantee that I will get a home loan?

A: No, VA cannot compel a lender to make a loan that would violate their lender policies. Lenders must also comply with VA income and credit standards. If a lender is unwilling to make a loan to you, we can only suggest that you try other lenders.

Q: How much is my entitlement?

A: Your basic entitlement is $36,000. For loans in excess of $144,000 to purchase or construct a home, additional entitlement up to an amount equal to 25 percent of the VA county loan limit for a single family home may be available. This loan limit can change yearly. VA county loan limits for 2009 are available at this link. The conforming loan limit for 2008 is $417,000 ($625,500 for Hawaii, Alaska, Guam and U.S. Virgin Islands). This means that qualified veterans could get a no down payment purchase loan for those amounts.

Q: How do I get a Certificate of Eligibility?

A: Web LGY: It may be possible to obtain a Certificate of Eligibility from your lender. Most lenders have access to the Web LGY system. This Internet based application can establish eligibility and issue an online Certificate of Eligibility in a matter of seconds. Not all cases can be processed through Web LGY – only those for which VA has sufficient data in our records. However, veterans are encouraged to ask their lenders about this method of obtaining a certificate.

You can apply for a Certificate of Eligibility by submitting a completed VA Form 26-1880, Request For A Certificate of Eligibility , to the Winston-Salem Eligibility Center, along with proof of military service. In some cases it may be possible for VA to establish eligibility without your proof of service. However, to avoid any possible delays, it’s best to provide such evidence.

Q: How do I obtain a VA Home Loan?

A: Here are the steps:

* Select a home and discuss the purchase with the seller or selling agent. Sign a purchase contract conditioned on approval of your VA home loan.
* Select a lender, present them with your Certificate of Eligibility if available, and complete a loan application. The lender can also obtain a Certificate of Eligibility on your behalf.
* The lender will develop all credit and income information. They will also request VA to assign a licensed appraiser to determine the reasonable value for the property. A Certificate of Reasonable Value will be issued. Note: You may be required to pay for the credit report and appraisal unless the seller agrees to pay.
* The lender will let you know the decision on the loan. You should be approved if the established value and your credit and income are acceptable.
* You (and spouse) attend the loan closing. The lender or closing attorney will explain the loan terms and requirements as well as where and how to make the monthly payments. Sign the note, mortgage, and other related papers.

Q: What are the benefits of a VA home loan?

A: There are many benefits of a VA Home loan:

* Equal opportunity.
* No down payment (unless required by the lender or the purchase price is more than the reasonable value of the property).
* Buyer informed of reasonable value.
* Negotiable interest rate.
* Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5% and exemption for veterans receiving VA compensation).
* Closing costs are comparable with other financing types (and may be lower).
* No mortgage insurance premiums.
* An assumable mortgage.
* Right to prepay without penalty.
* For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
* VA assistance to veteran borrowers in default due to temporary financial difficulty.

Q: What can VA not do?

A: Guarantee that a home is free of defects. VA guarantees only the loan. It is your responsibility to assure that you are satisfied with the property being purchased. The VA appraisal is not intended to be an “inspection” of the property. You should seek expert advice (a qualified residential inspection service), as necessary, BEFORE legally committing to a purchase agreement.

If you have a home built, VA cannot compel the builder to correct construction defects although VA does have the authority to suspend a builder from further participation in the home loan program.

VA cannot guarantee that you are making a good investment. VA cannot provide you with legal services.

Q: Is a guaranteed loan a gift?

A: No, it must be repaid, just as you must repay any money you borrow. If you fail to make the payments you agreed to make, you may lose your home through foreclosure.

Q: Can I get a loan for a home outside of the United States?

A: Unfortunately, the law only allows VA to guarantee loans on property in the United States, its territories, or possessions.

Q: Can I get a VA loan if I have had a bankruptcy in the last few years?

A: The fact you and/or your spouse have been adjudicated bankrupt does not in itself disqualify you for a VA home loan. The following rules apply:

* If the bankruptcy was discharged more than 2 years ago, it may be disregarded
* If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that you and/or your spouse are a satisfactory credit risk unless both of the following requirements are met:
o you and/or your spouse have reestablished satisfactory credit, and
o the bankruptcy was caused by circumstances beyond your and/or your spouses control (such as unemployment, medical bills, etc.)
* If the bankruptcy was discharged within the past 12 months, it will not generally be possible to determine that you and/or your spouse are satisfactory credit risks.

Q: Why do I have to pay a fee for a VA home loan? Since I paid a fee for my first loan, why is there a larger fee for my second loan?

A: The VA funding fee is required by law. The fee is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is slightly higher. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment. First and second time users who make a down payment of at least 5 percent pay a reduced funding fee of 1.5 percent, the same as first time users making the same down payment. For a 10 percent down payment, the fee drops to 1.25 percent. The effect of the funding fee on a veteran’s financial situation is minimized since the fee may be financed in the loan. National Guard and Reservist veterans pay a slightly higher funding fee percentage. To determine the exact funding fee percentage, please review the funding fee table.

Q: I want to buy a house with a VA loan. Do I need to occupy the property?

A: The law requires that you certify that you intend to occupy the property as your home. This requirement is considered satisfied if you actually intend to occupy the property as your home and in fact so occupy it when the loan is closed or within a reasonable time afterward.

Q: I am a single veteran stationed overseas and want to buy a home in my home town. My friends who are married can do this with their spouses occupying the property in their place, but VA says I can’t do this with my parents or other relatives occupying on my behalf. Isn’t this discrimination against single veterans?

A: The law specifically provides that occupancy by the veteran’s spouse satisfies the personal occupancy requirement. The law makes no provision for occupancy by any other relatives as a substitute for personal occupancy by the veteran.

Q: May a veteran join with a non veteran who is not his or her spouse in obtaining a VA loan?

A: Yes, but the guaranty is based only on the veteran’s portion of the loan. The guaranty cannot cover the nonveteran’s part of the loan. Consult lenders to determine whether they would be willing to accept applications for joint loans of this type. Lenders that are willing to make these types of loans will likely require a down payment to cover risk on the unguaranteed, nonveteran’s portion of the loan. Unlike other loans, the lender must submit joint loans to VA for approval before they are made.

Both incomes can be used to qualify for the loan. However, the veteran’s income must be sufficient to repay at least that portion of the loan related to the veteran’s interest in (portion of) the property and the nonveteran’s income must be adequate to cover the rest.

Q: If a veteran dies before the loan is paid off, will the VA guaranty pay off the balance of the loan?

A: No. The surviving spouse or other co-borrower must continue to make the payments. If there is no CO-borrower, the loan becomes the obligation of the veteran’s estate. Mortgage life insurance is available but must be purchased from private insurance sources.

General Rules for Eligibility

Military Service Requirements for VA Loan Eligibility:

Note: Applications involving other than honorable discharges will usually require further development by VA. This is necessary to determine if the service was under other than dishonorable conditions.

Wartime – Service During:

* WWII: 9/16/1940 to 7/25/1947
* Korean: 6/27/1950 to 1/31/1955
* Vietnam: 8/5/1964 to 5/7/1975

You must have at least 90 days on active duty and been discharged under other than dishonorable conditions. If you served less than 90 days, you may be eligible if discharged for a service connected disability.

Peacetime – Service during periods:

* 7/26/1947 to 6/26/1950
* 2/1/1955 to 8/4/1964
* 5/8/1975 to 9/7/1980 (Enlisted)
* 5/8/1975 to 10/16/1981 (Officer)

You must have served at least 181 days of continuous active duty and been discharged under other than dishonorable conditions. If you served less than 181 days, you may be eligible if discharged for a service connected disability.

Service after 9/7/1980 (enlisted) or 10/16/1981 (officer)

If you were separated from service which began after these dates, you must have:

* Completed 24 months of continuous active duty or the full period (at least 181 days) for which you were ordered or called to active duty and been discharged under conditions other than dishonorable, or
* Completed at least 181 days of active duty and been discharged under the specific authority of 10 USC 1173 (Hardship), or 10 USC 1171 (Early Out), or have been determined to have a compensable service-connected disability;
* Been discharged with less than 181 days of service for a service-connected disability. Individuals may also be eligible if they were released from active duty due to an involuntary reduction in force, certain medical conditions, or, in some instances for the convenience of the Government.

Gulf War – Service during period 8/2/1990 to date yet to be determined

If you served on active duty during the Gulf War, you must have:

* Completed 24 months of continuous active duty or the full period (at least 90 days) for which you were called or ordered to active duty, and been discharged under conditions other than dishonorable, or
* Completed at least 90 days of active duty and been discharged under the specific authority of 10 USC 1173 (Hardship), or 10 USC 1173 (Early Out), or have been determined to have a compensable service-connected disability, or
* Been discharged with less than 90 days of service for a service-connected disability. Individuals may also be eligible if they were released from active duty due to an involuntary reduction in force, certain medical conditions, or, in some instances, for the convenience of the Government.

Active Duty Service Personnel

If you are now on regular duty (not active duty for training), you are eligible after having served 181 days (90 days during the Gulf War) unless discharged or separated from a previous qualifying period of active duty service.

Selected Reserves or National Guard

If you are not otherwise eligible and you have completed a total of 6 years in the Selected Reserves or National Guard (member of an active unit, attended required weekend drills and 2-week active duty for training) and

* Were discharged with an honorable discharge, or
* Were placed on the retired list, or
* Were transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable service, or
* Continue to serve in the Selected Reserves

Individuals who completed less than 6 years may be eligible if discharged for a service-connected disability.

You May also be determined eligible if you:

* Are an unremarried spouse of a veteran who died while in service or from a service connected disability, or
* Are a spouse of a serviceperson missing in action or a prisoner of war

Note: Also, a surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit. However, a surviving spouse who remarried before December 16, 2003, and on or after attaining age 57, must apply no later than December 15, 2004, to establish home loan eligibility. VA must deny applications from surviving spouses who remarried before December 6, 2003 that are received after December 15, 2004.

Eligibility may also be established for:

* Certain United States citizens who served in the armed forces of a government allied with the United States in WW II.
* Individuals with service as members in certain organizations, such as Public Health Service officers, cadets at the United States Military, Air Force, or Coast Guard Academy, midshipmen at the United States Naval Academy, officers of National Oceanic & Atmospheric Administration, merchant seaman with WW II service, and others.