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An IRRRL is a Louisville VA-guaranteed loan made to refinance an existing Louisville VA-guaranteed loan, generally at a lower interest rate than the existing VA loan, and with lower principal and interest payments than the existing Louisville VA loan.
The principal and interest payment on an IRRRL must be less than the principal and interest payment on the loan being refinanced unless one of the following exceptions applies:
Term of the IRRRRL is shorter than the term of the loan being refinanced unless, OR
Energy efficiency improvements are included in the IRRRL. Improvements must be completed within 90 days immediately preceding the date of the loan closing. A significant increase in the veteran’s monthly payment may occur with any of the above exceptions, especially if combined with one of more of the following:
Higher interest rate when an ARM is being refinanced. It is the underwriter’s discretion to determine whether or not the increase in monthly PITI is acceptable.
General Guidelines for IRRRL
• Minimum credit score of 640
• Maximum loan amount is the existing VA loan balance plus the following: o Allowable fees and charges, plus
The cost of energy efficiency improvements, and o
The VA funding fee = .50. • The maximum loan term is the original term of the VA loan being refinanced plus ten years, but not to exceed 30 years.
• The borrower cannot pay off liens other than the existing VA loan from IRRRL proceeds. Any second lien-holder would have to agree to subordinate.
• All IRRRLs must contain either a conforming appraisal or a 2055 exterior (at minimum). The loan amount + funding fee must be supported by the value.
• Not eligible in the state of Illinois.
• IRRRLs must be current and have no 30-day or greater mortgage lates in the most recent 12 months. The following documentation is required to be in the loan file:
o Evidence the existing loan is current o
If the loan is seasoned 12 months or more, evidence that the existing loan has not had any 30-day or greater mortgage lates in the past 12 months o
If the loan is seasoned less than 12 months, evidence: The existing loan has no 30-day or greater mortgage lates since the inception of the loan and
No 30-day or greater mortgage lates for any other first mortgage loans associated with the property and borrower(s) in the most recent 12 months.
•While the borrower may pay any reasonable amount of discount points in cash, only up to two discount points can be included in the loan amount.
•An IRRRL cannot be used to take equity out of the property or pay off debts, other than the VA loan being refinanced. Loan proceeds may only be applied to paying off the existing VA loan and to the costs of obtaining or closing the IRRRL. Therefore, the general rule is that the borrower cannot receive cash proceeds from the loan.