On this page
- What a VA streamline refinance is and who can get one
- VA streamline refinance requirements
- VA IRRRL credit requirements, income and appraisal
- VA streamline refinance closing costs and funding fee
- Loan amount, term, cash back and second mortgages
- Pros and cons of a VA streamline refinance
- How to get a VA streamline refinance
- VA streamline refinance FAQ
A VA streamline refinance, which VA calls an interest rate reduction refinance loan (IRRRL), replaces your current VA loan with a new VA loan. VA generally requires no appraisal, no credit underwriting and no income documentation for it. However, the new loan must lower your rate or payment (or move you from an adjustable rate to a fixed rate) and pass the federal benefit tests.
Below are the eligibility rules, the rate and 36-month cost tests, the credit and income exception, the funding fee, the loan amount and the steps.
What a VA streamline refinance is and who can get one
An IRRRL is a VA-guaranteed loan that refinances an existing VA-guaranteed loan, generally at a lower interest rate and with a lower principal and interest payment, according to VA Pamphlet 26-7, chapter 6. Congress created it in 1980 (Public Law 96-385), and the authority now sits in 38 U.S.C. 3710(a)(8).
The VA IRRRL page lists three eligibility conditions:
- You already have a VA-backed home loan.
- The IRRRL refinances that same VA-backed loan.
- You certify that you live in the home now or lived in it before.
As a result, the program is VA-to-VA only. An FHA, USDA or conventional loan cannot move into a VA loan this way. Also, you must still own the home, and the people on the old loan generally stay on the new one. VA’s handbook lists a few exceptions, for example a divorced veteran refinancing alone.
The occupancy rule is looser than for a purchase. For example, a veteran who moved out on military orders and now rents the home can still certify prior occupancy. So can the spouse of an active duty servicemember who lived there while the servicemember could not.
The IRRRL is one of several VA refinance options. If you want cash from your equity or have a non-VA loan, compare the paths in this guide to VA refinance options.
VA streamline refinance requirements
These are the VA streamline refinance rules a lender checks. Pamphlet 26-7 Topic 1 dates from 2009, so where the newer statute (38 U.S.C. 3709, added in 2018) is stricter, the statute governs.
| Requirement | The rule | Source |
|---|---|---|
| Existing VA loan | You refinance a VA-guaranteed loan on the same home | Pamphlet 26-7 ch. 6, Topic 1a |
| Occupancy | You certify that you live there now or lived there before | VA IRRRL page; Topic 1m |
| Lower rate | The new rate must be lower, unless you are refinancing an adjustable-rate mortgage (ARM) into a fixed rate | Topic 1b; 38 CFR 36.4307(a)(3) |
| Lower payment | Principal and interest must drop, unless you refinance an ARM into a fixed rate, shorten the term or add energy efficiency improvements | Topic 1c; 38 CFR 36.4307(a)(3) |
| Fixed to fixed | The rate must drop at least 0.50 percentage point (50 basis points) | 38 U.S.C. 3709(b)(2) |
| Fixed to ARM | The rate must drop at least 2.00 percentage points (200 basis points) | 38 U.S.C. 3709(b)(3) |
| Benefit test | The lender must give you a net tangible benefit test | 38 U.S.C. 3709(b)(1) |
| Cost recoupment | Fees and closing costs must be recouped within 36 months | 38 U.S.C. 3709(a) |
| Seasoning | The later of six consecutive monthly payments and 210 days after the first payment due date | 38 U.S.C. 3709(c) |
| Payment history | A loan 30 or more days past due at closing needs VA prior approval | Topic 2a; Topic 4 |
The 36-month recoupment rule
Under 38 U.S.C. 3709(a), your lower monthly payments must pay back the refinance costs within 36 months. The count leaves out taxes, escrow deposits and fees paid under the VA loan statute, which VA’s guidance treats as including the funding fee. In addition, you sign a statement that compares the old and new rate and payment and shows how long it takes to recoup all closing costs (Topic 1d).
Here is how the math works, using example figures:
- Passes: $4,500 in costs divided by a $150 monthly saving equals 30 months, inside the 36-month limit.
- Fails: $6,000 in costs divided by a $120 monthly saving equals 50 months, so the loan cannot be guaranteed as structured.
If the lender pays your costs through a higher rate, the costs counted change too. In that case, ask your lender to show the calculation. For a broader look at break-even math, see is refinancing worth it.
The rate drop test
Say your current fixed rate is 6.50% (an example rate, not today’s rate). A new fixed rate of 6.00% passes, because it is 0.50 point lower. By contrast, 6.25% fails, because it is only 0.25 point lower.
The lower rate also cannot come only from discount points unless you pay them at closing. Points added to the loan are limited (38 U.S.C. 3709(b)(4)).
Seasoning and payment history
VA will not guarantee the new loan until the later of two dates: when you have made six consecutive monthly payments, and 210 days after the first payment due date on your current loan. Therefore, lenders will not close a loan with a first payment due March 1 before late September.
If your loan will be 30 or more days past due at closing, the lender must send the file to VA for prior approval. Otherwise, any lender can close the loan on its own (Topic 1p). VA sets no rule about late payments in the past 12 months. However, lenders can set their own limits, so a recent late payment can still cost you an approval at some lenders.
VA IRRRL credit requirements, income and appraisal
Pamphlet 26-7 says generally “no appraisal, credit information or underwriting is required on an IRRRL” (Topic 1a). In other words, VA does not require credit underwriting, income documentation or an appraisal for most VA streamline refinance loans. VA also sets no minimum credit score for any VA loan (Pamphlet 26-7, chapter 4).
When an IRRRL requires credit and income
A “credit qualifying IRRRL” applies in two cases. The first is when your full monthly payment (principal, interest, taxes and insurance) rises by 20% or more. That can happen when you move from an ARM to a fixed rate, shorten the term or finance costs into the loan. Then the lender must confirm that your income supports the new payment and your other debts, and it must certify that you qualify (Topic 1c).
For example, if your current payment is $1,800, a new payment of $2,160 or more would trigger full qualifying. The second case is a loan that is 30 or more days past due, which goes to VA for prior approval with a credit report and pay stub (Topic 2).
Lender overlays
Lenders can add their own rules on top of VA’s, called mortgage overlays. A lender may pull credit, set a minimum score or order an appraisal. VA lets the lender charge a reasonable fee for a credit report or appraisal it needs and add that fee to the loan (Topic 1e). Because overlays vary, a veteran turned down by one lender may still qualify with another.
The home’s value usually does not matter under VA rules, since VA requires no appraisal. However, a lender that orders one may apply its own limits, and financing discount points brings in a loan-to-value test.
VA streamline refinance closing costs and funding fee
The VA funding fee for an IRRRL is 0.5% of the loan amount, per the VA funding fee and closing costs page. On a $250,000 loan, that is about $1,250. The lender figures the exact amount on VA Form 26-8923. Some veterans are exempt; see who pays the VA funding fee. Also, VA loans carry no monthly mortgage insurance.
Here is what you can roll into the new loan (Topic 1e):
- All allowable closing costs, including the lender’s flat charge
- The VA funding fee
- Up to two discount points (you pay any more in cash)
- Credit report and appraisal charges the lender requires under its own rules
As a result, you may be able to close with little cash. Your Loan Estimate shows the exact cash to close.
No-closing-cost VA streamline refinance offers
A “no closing costs” offer usually means one of two things. Either the costs go into your loan balance, or the lender sets a higher rate and pays them with a lender credit. VA allows the second option if the loan still meets the lower rate and payment rules.
Financing costs raises your balance, while a lender credit raises your rate for the life of the loan. VA and the CFPB warn that “no out-of-pocket costs” offers often add to your principal.
VA streamline refinance rates
The VA does not set IRRRL rates. Instead, rates vary by lender and change daily, so compare Loan Estimates from several lenders on the same day.
Loan amount, term, cash back and second mortgages
How much you can borrow
The maximum VA IRRRL loan amount is your existing VA loan balance plus late payments and charges (prior approval loans only), allowable fees and charges (including up to two points), energy efficiency improvements and the funding fee (Topic 1g). The lender uses VA Form 26-8923 to calculate it.
The IRRRL loan amount is set by this formula, not by your entitlement, and VA guarantees at least 25% of it (Topic 1g). The new loan can be more than the secondary-market limits. However, the lender must be able to sell the loan, so its overlays can limit the amount. An IRRRL also does not use more of your entitlement; your entitlement use stays the same before and after (Topic 1h).
Term choices
You can shorten or lengthen your term. The new term can be up to the old loan’s original term plus 10 years, capped at 30 years and 32 days (Topic 1i). So a 15-year loan can become a 25-year loan at most. A longer term lowers the payment but adds total interest.
Cash back
You cannot take equity out with an IRRRL (Topic 1f). For cash from your equity, look at a VA cash-out refinance. The one exception is reimbursement of up to $6,000 for energy efficiency improvements completed within 90 days before closing. Small amounts from payoff adjustments or an escrow refund are allowed, but the lender must consult VA above $500.
Second mortgages
If you have a second mortgage or home equity line, its holder must agree to let the new VA loan take first position (called subordination). You also cannot pay off the second lien with IRRRL money (Topic 1j).
Pros and cons of a VA streamline refinance
Pros
- VA generally requires no appraisal, income documentation or credit underwriting.
- Closing costs, the funding fee and up to two points can go into the loan.
- The funding fee is 0.5%, and there is no monthly mortgage insurance.
- It can move you from an ARM to a fixed rate.
- Any lender can close most IRRRLs without sending them to VA.
Cons
- No cash out beyond the $6,000 energy reimbursement.
- Costs must pass the 36-month recoupment test, which rules out some small rate drops.
- The 0.5% funding fee applies unless you are exempt.
- Financed costs and a longer term increase your balance and total interest.
- Lender overlays can add credit score, appraisal or payment history rules.
How to get a VA streamline refinance
- Pull your loan details. Find your current rate, whether it is fixed or adjustable, your principal and interest payment and your first payment due date.
- Check seasoning. Confirm that you have made six consecutive payments and that 210 days have passed since the first payment due date.
- Get quotes from several lenders. Ask each one about its overlays, the rate, the points and whether it credits your costs.
- Watch for misleading offers. VA warns that claims about skipped payments or very low rates may signal a misleading offer. See the VA and CFPB warning.
- Give your lender your COE. Bring the Certificate of Eligibility from your original loan, or ask the lender to get it electronically.
- Review the benefit test and recoupment statement. Check the new rate, the payment and how many months it takes to recoup your costs.
- Keep paying your current loan. A payment that is 30 days late at closing sends the file to VA for prior approval.
- Close. You sign the occupancy certification, and the funding fee is paid or financed.
VA streamline refinance FAQ
Can I use a VA streamline refinance on an ARM or hybrid loan?
Yes. A hybrid loan such as a 5/1 counts as an ARM, and refinancing an ARM into a fixed rate is an exception to the lower rate and payment rules. However, if your full payment rises 20% or more, the lender must check your income and debts.
Do I need a new certificate of eligibility?
No new certificate is needed. Give your lender the COE from your original VA loan, or ask it to get your COE electronically through VA’s portal. For more, read this guide to the VA certificate of eligibility.
Can I use any lender for a VA IRRRL?
Yes. You do not have to use the lender that holds your current loan. Any lender that makes VA loans can close an IRRRL, with or without automatic authority (Topic 1p). Terms and fees vary, so VA suggests contacting several lenders.
Can I get a VA streamline refinance on a rental?
Yes, if you lived in the home before and certify that prior occupancy. You must still own the property, and the loan must be a VA loan.
Is there a limit on how many times I can use a VA IRRRL?
Neither 38 U.S.C. 3709 nor Pamphlet 26-7 sets a lifetime count. Still, each new IRRRL must meet seasoning, the rate drop test and the 36-month recoupment rule. For entitlement reuse, see how many times you can use a VA loan.
Can I skip two payments with a VA streamline refinance?
No payments are skipped. At closing, the new loan pays off the old one, including interest that has built up, and you prepay some interest on the new loan. If those amounts go into the new loan, you still pay them, with interest, over time.
A VA streamline refinance works best when a lower rate or a fixed rate clearly pays back its costs. Before you apply, run the 36-month math with your own numbers, then compare Loan Estimates from at least two lenders on the same day.
