The VA IRRRL, or the Interest Rate Reduction Refinance Loan, helps veterans with a VA loan refinance this loan. It’s meant to help veterans lower their payment or refinance into a less risky term. Usually, in order to use this program, everything must remain the same. The lender may use the original qualifying factors for the VA loan and in most cases, must use the same borrower and co-borrower for qualifying.
What happens if your life circumstances changed, though? Can you still use the VA IRRRL? We look at different situations below.
Acceptable Removal of a Co-Borrower
In a majority of the cases, you can remove a co-borrower as long as the original veteran remains on the loan. We look at specific situations more closely below:
- You are the veteran and you get divorced, you can remove your ex-spouse
- You are the veteran and were unmarried when you bought the home but are now married, you can add your new spouse
- You are the veteran and you get divorced and remarried, you can remove your ex-spouse and add your new spouse
- You are the veteran and your spouse who was a co-borrower passed away, you can remove your deceased spouse
- You are the veteran and have a non-spouse co-borrower, you can remove him/her from the loan
Unacceptable Removal of a Co-Borrower
Just as there are acceptable reasons to remove a co-borrower with the VA IRRRL, there are also situations the VA doesn’t allow, including:
- Your spouse was the veteran and you want to refinance the home after you get divorced
- You married your spouse after he/she bought their home with a VA loan and he/she has since died
- You were married to your spouse when he/she bought the home, but you were not on the loan and he/she has since died
Qualifying for the VA IRRRL
If you still want to apply for the VA IRRRL after learning whether you can add or remove your co-borrower, you will need to meet the following requirements:
- All VA loan mortgage payments must have been on time for the last 12 months. Some lenders may allow an exception for one 30-day late payment during that time, though.
- You must prove that there is some type of net tangible benefit. This can include a lower payment, lower interest rate, or less risky loan. In other words, you must either save money or reduce the risk of your loan (shorter term or choose a fixed rate over an ARM).
If you meet the above requirements, you can apply with several lenders. The VA sets the requirements, but the funding lenders have the final say in what they fund. You may find that you have to shop around with different lenders to find a willing lender.
Some lenders add their own requirements, called lender overlays. For example, some lenders want to see your credit score and credit history. It makes them feel better to know that you are still financially responsible even after holding the VA loan for a while. Since a VA IRRRL gives you new money, paying off your original VA loan, it puts the lender at risk of default if they don’t know your risk level.
If you need to add or remove a co-borrower with your VA IRRRL, make sure it’s a situation the VA will allow. If it is, you can then shop around for the right VA lender that can give you the best deal on your mortgage.