IRRRL s. Interest Rate Reduction Refinance Loans. Helping Our Veterans While Helping Your Business

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1 IRRRL s Interest Rate Reduction Refinance Loans Helping Our Veterans While Helping Your Business

2 What is an IRRRL? An IRRRL is a VA guaranteed loan made to refinance an existing VA guaranteed loan, generally at a lower interest rate than the existing VA loan with lower principal & interest payments than the existing VA loan. VA to VA refinance only The VA wants to help qualified Veterans One of the last true streamline products Check Lenders guidelines which may differ from what is outlined in the VA Lenders Handbook

3 IRRRL s- Streamline Documentation No income verification No asset verification Unless Veteran needs funds for closing No credit Most Lenders require at least a mortgage only credit report to ensure that the Veteran is current If the Veteran is not current on his/her mortgage, the loan will be required to submitted to VA for prior approval Veterans with recent Chapter 13 may need Trustee approval No ratios

4 Qualifying No appraisal Most Lenders do require some type of value analysis No AUS Funding fee is.5% No monthly MI The minimum guaranty is 25% The dollar amount of the prior VA loan is transferred to the new loan- reuse the original entitlement As of 1/25/12, the Certificate of Eligibility is no longer required for IRRRL s

5 Qualifying The proposed P&I must be reduced or the loan term must be reduced with the exception of: Refinancing from an ARM or GPM to a fixed rate If PITI is increasing by more than 20% loan, Lenders are required to determine that the Veteran qualifies for the new payment Lenders typically require full credit qualifying files The term of an IRRRL may not exceed the original term of the loan being refinanced by more than 10 years, but not to exceed 30 years and 32 days

6 Qualifying Exception to the VA occupancy rule Veteran will need to certify that the subject was previously owner occupied Veteran must still own property and stay on the new loan If Veteran has died and the surviving spouse was coobligor on original loan, that spouse is considered a Veteran for the purpose of the IRRRL Veteran s statement AKA VA Rate Reduction Certificate or Old vs. New Compares the old and new monthly payments and includes the number of months it will take to recoup the closing costs

7 Maximum Loan Amount VA Form IRRRL Worksheet Existing VA loan payoff + Allowable VA closing costs + VA funding fee+ Up to 2 reasonable bona fide discount points = TOTAL LOAN AMOUNT Payoff of 1 st lien only 2 nd mortgages will have to be subordinated No cash back at closing to the borrower Up to $500 for incidentals Exception is EEM (energy efficient mortgage)

8 VA Allowable Closing Costs VA has a list of allowable and non-allowable closings costs for all VA home loans Veterans can pay: 1. 1% Origination point (with no unallowable closing costs) OR 2. Up to 1% in unallowable closing costs (cannot charge origination point) OR 3. Blend of both

9 Adding an EEM to an IRRRL Up to $6000 of energy efficient improvements can be added to an IRRRL without prior approval from VA $1-$2,999= VA does not require any additional documentation other than information regarding the EEM improvements $3000-$6000= EEM improvement information is required along with documentation to prove that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs Over $6000+= Requires prior VA approval Remember 20% rule (increase in PITI over 20% requires Lender to qualify Veteran for new mortgage)

10 Attracting New VA Business Advertise your services to your local: Military bases American Legions VFW s Visit these organizations to provide lunch & learn Provide a press release in the local newspapers and Veteran newsletters Reach out to community and business leaders Let them know about your work with Veterans and ask for their involvement (perhaps have a donated free dinner or movie on move-in day) There are lists available that concentrate on VA business Become a VA expert

11 USA Cares Organization USA Cares provides financial & advocacy assistance to US Military personnel, Veterans and their families Free on-line Certified Military Housing Specialist Course that helps to understand how to work with military personnel including understanding military paystubs Once successfully completing this course, you will be listed as a Certified Mortgage Housing Specialist and can advertise using the CMHS course seal Visit to register or contact beverly.frase@usacares.org

12 Brokers & VA Loans Brokers do not require any type of special VA approval Sponsoring Lenders are required to submit a $100 fee with a request to add the Broker to their list of agents

13 For Additional Information Under Veteran Services, click Home Loans Lenders Handbook Veterans Information Portal Sign up for announcements and trainings at your Regional Loan Centers Contact your Lender Click to ask scenario or general questions

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