Streamline refinancing is an expedited, efficient way to refinance your mortgage. The FHA Streamline Refinance and the VA IRRRL (Interest Rate Reduction Refinance Loan) are such examples, helping homeowners realize savings through lower rates and reduced payments. Each program affords benefits and imposes conditions to their respective homeowners, which we shall examine for qualifying purposes. We can help find a lender, too.»
FHA Streamline Refinance vs IRRRL
Mortgage. An FHA-to-FHA refinance, the FHA Streamline Refinance is for existing FHA loans while the IRRRL is exclusive for VA loans only.
Seasoning Requirements. The FHA requires the mortgage to be current with no missed payments for the past six months at the very least. You have to wait at least 210 days since the closing date of your mortgage to refinance. The VA requires six monthly payments have been made on the mortgage and a late payment that is no more than 30 days for once may be allowed.
Appraisal, Credit. Appraisals are not required for an FHA streamline refinancing, the same goes with the IRRRL. FHA only requires a credit report for credit qualifying streamline refinance. The IRRRL does not generally require credit to apply for a refi. Do note that both loans will be coursed through and approved by lenders who may or may not require a credit score to underwrite each mortgage.
Mortgage Insurance. For the FHA streamline refi program, you will pay an upfront mortgage insurance premium at closing and an annual mortgage insurance premium paid every month. Meanwhile, the VA does not require a mortgage insurance; it however requires payment of an upfront funding fee which is typically 2.15% of the base loan amount.
Closing Costs. FHA streamline refinancers are not allowed to finance their closing costs into the refi loan so they have to be paid upfront. One exception is when there is a new home appraisal in which case the closing costs can be wrapped into the loan that should be 1.5% higher than the old loan. The IRRRL’s closing costs don’t have to be paid upfront; they can either be wrapped into the new loan or the loan to have a higher rate so the lender can cover the closing costs.
Equity. FHA’s streamline refinancing doesn’t have a loan-to-value ratio requirement. Whether you are underwater or have little equity in your home, you can still do an FHA streamline refinance if you meet the other requirements.
Purpose. The FHA streamline refinance must bring about a net tangible benefit to the borrower. Being that the homeowner will realize significant savings as a result of a lower rate, or if he/she switches to a fixed-rate mortgage, that he/she gets protected from the rate fluctuations brought by an adjustable-rate mortgage. The VA streamline refinancing primarily requires that the transaction results in a lower rate to reduce monthly payments except when you do an ARM to FRM switch because your rate is bound to go up.
Cash-out. Both programs, FHA Streamline Refinance and IRRRL, prohibit the borrower from receiving any cash proceeds out of the refinance. If your purpose of refinancing is to get cash, you may apply for the cash-out refinance program at FHA or VA.