VA refinance

VA Loan Interest Rate Reduction Refinancing Rules

August 15, 2011

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VA Loan Interest Rate Reduction Refinancing Rules

When a borrower applies for a VA home loan, he or she might not be anticipating a major life change such as a divorce, getting remarried, or getting married for the first time.

Over the lifetime of a VA insured mortgage the borrower’s status or needs may change, and when it comes time to apply for refinancing, the borrower may need to explore options on having a new spouse–or no spouse at all–as an “obligated party” on a VA Interest Rate Reduction Refinancing Loan.

Can the borrower add someone new when it’s time to apply for a VA IRRRL? What about the borrower who took out a VA mortgage with someone else but wants to refinance the loan all by themselves?

The VA Lender’s Handbook has a collection of rules which apply in these situations. For example, an unmarried vet with a VA loan may wish to add a spouse to the loan when it’s time to apply for the IRRRL. The Department of Veterans Affairs permits this.

It also allows a vet who purchased a home with a VA loan with a spouse to refinance alone after a divorce.

VA rules also permit the veteran to refinance with a different spouse. What’s not permitted? Situations where the spouse alone wishes to refinance. For example, if the veteran and spouse purchase the home with a VA loan and there is a divorce, the spouse alone cannot apply for a VA IRRRL.

This also applies in cases where the veteran had a joint VA loan with non-veterans.

Because VA loan benefits are intended for veterans, in most cases the non-veteran obligated on the loan cannot apply for VA refinancing without the veteran’s participation in the loan, even if the non-veteran owns the property or has assumed financial responsibility for it by themselves.

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2 Comments
  1. Steven Jeffers

    I have a current VA loan at 5.5% and have been shopping for a Streamline refinace. All six lenders I've spoken with are requiring an apprisal. According to Zillow, I'm about 30K underwater. This progran doesn't seem to be designed to help veterans in my situation. Is there something I'm missing, i.e. another program?

    • Joe Wallace

      Hi Steven--what's you main issue in your current situation? That the lenders aren't willing to work with you at all? Or that you're looking for a no-appraisal refinancing option? Or are you seeking a no-credit qualifying refinancing option that's not being offered?

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