It is normal to ask what the credit requirements are when you apply for a loan because it seems like every lender wants to know what your credit score is before talking to you. The VA IRRRL program might be one of the only programs that does not care about your credit score and most of your credit history though!
What is the VA IRRRL?
It helps to know what the VA IRRRL program is and how it works so that you can understand the reason they do not have specific credit requirements. This program is meant to help you make your mortgage payment more affordable, typically by lowering your interest rate. In some instances, however, you can refinance from an adjustable rate loan to a fixed rate loan, regardless if the interest rate decreases or not. The VA IRRRL is not a cash out refinance of any sort, though.
Credit Requirements to Qualify
Because the program allows you to lower your mortgage payment, there are no credit requirements in terms of a credit score. In fact, the VA does not require that lenders pull your credit in order to qualify you for the loan at all. Instead, they are simply required to focus on your housing history. The largest requirement in terms of credit is that you have no more than one late housing payment in the last 12 months. If you have held the VA loan for less than 12 months, then you cannot have any late housing payments.
Since the lender does not need to look at your credit, they may or may not pull it. Some lenders still enforce the 620 credit score rule even though the VA does not require it, but not every lender does this. In regards to your remaining credit, the VA will not be concerned with what you have going on, but some lenders might impart their own overlays, in which case your credit might play a role. Shopping around with different lenders can help you find a lender that will not need to pull your credit.
What does the IRRRL Require?
The good news is that the VA IRRRL is one of the easiest loans to qualify for. Basically, the VA wants to give you the loan because your payment will either be lower or less risky because it will not adjust. Because the VA does not fund the loan, however, some lenders have tighter restrictions than the VA would require. In general, the VA requires:
- A clean housing history
- A current VA loan
- Stable employment
In reality, this means you could be upside down on your mortgage because your value dropped; have a completely different income because you changed jobs; and have late payments other than housing history on your credit report and still get approved.
Wil this happen, though? In most cases, a lender would catch these things; however, they will generally still provide the IRRRL program even if you are upside down on your home because it makes your loan payments more affordable, enabling you to get ahead. A lower interest rate means that you are able to put more money towards your principal, which will help you catch up faster in the long run.
If you currently have a VA loan and the interest rates are lower now than they were when you first obtained your loan, the VA IRRRL program is a great way to save money. The credit requirements are very simple and the entire process is streamlined. With just a few pieces of information and money for the funding fee and closing costs, you can refinance your loan to make it more affordable.