The VA streamline refinance allows veterans with a VA loan to refinance with very little verification. The VA relies on your mortgage payment history to qualify you for the loan. This is the only true verification the VA requires. Because of the depth of this qualification, late mortgage payments are highly frowned upon for this loan program.
So what happens if you pay your mortgage late? Are you ineligible for the VA streamline program?
Late Payments on Your VA Loan
The VA allows one late payment on your VA loan when you apply for a VA streamline loan. But there’s more to it.
If you have had the loan for at least 12 months, then one 30-day late payment is allowed. That’s it, though. You cannot have more than one 30-day late payment. You also cannot have a late payment that is more than 30 days late, such as 60 or 90 days late.
Now, if you’ve only had the loan for less than 12 months, you are not allowed to have any late payments. You must have a perfect payment history if this is the case. Even if you have had the loan for 12 months, the late payment cannot be within the last 3 months. In other words, the last three months of payments must be on time payments.
Dealing With a Current Late Payment
If you have a late payment at the time you apply for the VA IRRRL, you may secure an approval, but it’s based on what the lender will allow. Basically, the lender needs to see that your late payment was due to circumstances outside of your control. Maybe you lost your job or you fell ill. In other words, they don’t want to see that you just fell behind because you couldn’t manage your finances.
If you can prove to the lender that the lower payment on the VA IRRRL will help you catch up, the lender may grant you an approval. It’s on a case-by-case basis, though, as each situation is different. There isn’t a cut and dry answer as to who a lender will grant an exception to and who they will not.
How to Qualify for a VA IRRRL
Aside from the mortgage payment history, the VA has a few other rules you must follow to get the VA IRRRL:
- You must prove that you lived in the home as your primary residence up until the point that you applied for the VA IRRRL. The Interest Rate Reduction program doesn’t require you to live in the home after you secure the loan, but the original VA loan does require it.
- You must prove that you have stable employment. The lender doesn’t necessarily have to verify your income, but they will want to verify that you are employed. This at least lets the lender know that you have the means to pay the mortgage. If you can’t verify employment, you may not get the loan.
- You must verify any assets you use to pay the closing costs at the closing. In other words, you must provide the last two months of bank statements to show that you have the assets to close on the loan.
You don’t have to provide a new appraisal, COE, or even a credit report. The VA can use all of your qualifying factors from your original loan to qualify you for the loan. But as is the case with any loan, the lender can add their own requirements since they are the ones funding the loan.