VA IRRRL Guidelines
Welcome to the SIT REP series that we are doing on the VA IRRRL refinance program. Today we are going to be talking about some of the VA IRRRL guidelines. The VA streamline refinance program is designed to help veterans save money by streamlining the refinance process, and Low VA Rates can help you do just that. We are passionate about educating our veterans and helping them get terrific interest rates. In the video below Eric talks about two subjects that are commonly known as overlays in the mortgage industry called seasoning and pre-payment penalties. Watch the video below to learn more about the VA IRRRL guidelines and what to watch out for.
VA Streamline Guidelines: Video Transcription
Hello, and welcome back to our Sit Rep series here at Low VA Rates. Today, we’re going to continue talking about the VA streamline refinance, specifically seasoning and pre-payment penalties. What we hope to go over in this video is whether or not the VA Streamline loan requires that you make a minimum number of payments before you’re allowed to refinance and whether or not you can be penalized if you do refinance early.
So what is seasoning? “Season” refers to the amount of time you have been in your mortgage, or how many mortgage payments you have made. We at Low VA Rates have approved a lot of loans this year; the market is great, interest rates are low, and people are buying homes left and right. Let’s say you bought a home back in April at a 4.25 interest rate, and now you want to refinance because interest rates are at 2.75. Now, suppose your realtor or your last mortgage lender says you can’t refinance yet because you haven’t been in your current mortgage long enough. They’re referring to seasoning.
Maybe you’re also concerned about accruing pre-payment penalties, which are penalties charged against you for refinancing your loan too soon after its receipt. Back before the housing collapse, there were a lot of loans out there that forced you to stay in them for a certain period of time or else you were penalized.
So what does the VA say about all this? Let’s look at their guidelines: as far as the VA is concerned, there are no seasoning requirements at all when it comes to refinancing. They don’t care if you’ve made one payment, six payments, or even no payments; if you want to streamline your mortgage, you can. There are also no pre-payment penalties associated with VA loans, and there never have been, even before the housing crisis.
As we’ve mentioned before, you don’t have to take our word for this. We’re experts, but if you’d like to look at the VA lenders handbook online, feel free to do so. You can hit Ctrl+F once in a given chapter and search for information by word, such as “seasoning” or “pre-payment penalties.” We can tell you that you won’t find any rules or guidelines in there concerning these.
So what does the competition say? The industry standard for seasoning is six months. Most of our competitors say they cannot give customers an IRRRL loan if they haven’t been in their mortgage for at least six months (or perhaps, if they haven’t made six payments). There are also many lenders that will try to tie you down with their version of a pre-pay penalty. I’ve personally called the VA about this one because I’ve seen and have been disgusted by other lenders giving someone a VA loan and then making them sign an agreement. This agreement is not an industry or VA form but a made-up one between the bank and the homeowner. This agreement states that if the customer refinances their loan before six payments are made, they will be penalized.
This isn’t a pre-payment penalty. This is a way for lenders to keep you on their books longer. Don’t fall for it, and don’t ever sign one of those documents.
Now let’s talk about the most important part: what we at Low VA Rates say. As we’ve mentioned in all our Sit Rep videos, we do what the VA does; we follow VA guidelines. We have no seasoning requirement at all, not even for one day, nor do we charge pre-payment penalties. We aren’t going to create some document that forces you to stay in our loan if it doesn’t make sense for you to stay. As a matter of fact, we have a thousand-dollar credit we will put towards your next mortgage with us if you refinance within six months. So imagine you buy a home with Low VA Rates in July, and then three or four months later, interest rates are lower and you want to take advantage of that. If you come back to us within that first six-month period of your loan, not only will we allow you to refinance, but we’ll also give you a thousand-dollar credit towards that next loan.
Thanks for watching this Sit Rep video on seasoning and pre-payment penalties. You can call us or visit us online; we are always waiting here to help you with your next refinance or purchase.