If you are a veteran, you may have the benefit of the VA IRRRL program. Otherwise known as the Interest Rate Reduction Refinance Loan, it allows veterans to refinance a current VA loan easily. Unlike when you took out your original VA loan, you won’t need to verify your income, credit score, or home value. Understand that some lenders may still require this though just to minimize their risk of default. One thing that you won’t need, though, no matter which lender you use is your COE or Certificate of Eligibility.
The Reason you Don’t Need a COE
In order to secure your original VA loan, you had to prove that you were eligible for the program. In other words, you had to prove that you had a Certificate of Entitlement. You may have had your lender obtain it for you (the easiest method) or you may have mailed away for a copy of it yourself.
Either way, you had to prove your entitlement. The lender knows that you used it in order to secure your current VA loan. They don’t need to see the certificate again. Of course, if you have it handy and want to include it in the documents that you give to the lender, it can’t hurt, but it’s not required.
What You Do Need for the VA IRRRL
According to the VA, you need very little verification for the VA IRRRL program. There are two things you must show. You must prove that you paid your last 12 mortgage payments on time. If you have held the mortgage for 12 months or longer, the VA does allow one 30-day late payment in that time, but it can’t be within the last 3 months.
You also must prove that there is a benefit for the refinance. The VA wants to make sure that you don’t needlessly refinance because it costs money. It often takes borrowers a while to pay off the closing costs of the loan, reducing the benefit of the refinance. It is fairly easy to prove a benefit for the refinance, though. As long as you meet one of the following benefits, you may qualify:
- Lower interest rate and/or lower monthly payment
- Refinance out of an ARM loan into a fixed rate mortgage
- Refinance into a shorter term loan
These are the most common ways to prove there is a net tangible benefit for the refinance. Keep in mind, if you refinance out of an ARM into a fixed rate or into a shorter term from a longer term, your payment may increase. The VA only allows your payment to increase up to 20% before they require you to fully verify your income, credit score, and home value.
Finding the Best Loan
You are able to use any lender for your VA IRRRL. You do not have to use your current lender – any lender can verify that you had eligibility by looking at your current loan specifications. If the lender wants further verification, they can ask you for a copy of your COE if you still have it. They can also verify with the VA that you have eligibility should they question it.
This means you can check with several lenders, which we suggest that you do. Applying for the VA IRRRL with different lenders lets you know the average interest rates and fees available to you. This way you can choose the loan with the best rate and terms for your situation.
Typically, lenders don’t need your COE for a VA IRRRL. If you happen to come across a lender that requires it, you can provide the document you had from your current VA loan. If you don’t have it, the lender can verify your eligibility in a matter of minutes, making it easy for you to refinance.