VA Interest Rate Reduction Refinancing Loans: Who Can Get Them?
For those with VA home loans considering a refinancing loan in the new year, there are several options available from the Department of Veterans Affairs. There are cash-out refinancing loans and Interest Rate Reduction Refinancing loan (IRRRL) options.
In many cases a VA IRRRL is easier to get than a cash-out refinancing loan (as long as the borrower meets VA requirements for non-credit qualifying IRRRLs), but many wonder who is eligible to apply for a VA IRRRL.
According to the VA Lender’s Guide, “Generally, the party(ies) obligated on the original loan must be the same on the new loan (and the veteran must still own the property).”
But are there cases where a “change in obligors” could still result in IRRRL approval? The VA instructions to lenders states, “The lender should contact VA regarding a proposed IRRRL involving a change in obligors unless the acceptability of the IRRRL is clear.”
This means there may be some room for flexibility when it comes to IRRRL approval. For example, a veteran who is getting a divorce may not be interested in owning the property any longer, turning over responsibility for the home to the spouse. According to the VA Lender’s Guide, “…the divorced spouse is keeping the home and wishes to refinance. The spouse cannot get an IRRRL unless the veteran agrees to be obligated on the new loan and commit his or her entitlement to the new loan. A person without entitlement cannot get an IRRRL or any other type of VA loan.”
So an IRRRL in this case would be conditional upon the approval of the veteran and the lender.
In cases where a veteran and a new spouse want to take out an IRRRL, there is no trouble with basic eligibility for the refinancing loan, assuming the borrowers meet the other requirements of the program. The same goes for a veteran who gets divorced and applies for the refinancing loan alone. Vets can also apply for an IRRRL with another veteran who substitutes his or her entitlement.
The rules covering surviving spouses address two different types of circumstances; surviving spouses named on the original loan and those who were not obligated on the original VA mortgage. Non-military spouses who want to apply for a VA IRRRL alone after the death of the veteran spouse are eligible to do so, but only in cases where the spouse was obligated on the original loan.