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Topic 4. Quick Reference Table for IRRRLs Versus Cash-Out Refinancing Loans
April 10, 2009
This section has been updated to remove references to a 90 percent limit and a maximum guaranty on refinancing loans, and to make minor grammatical edits.
a. Table IRRRL versus Cash-out
The following table provides a quick reference for IRRRL loans versus cash- out refinancing loans:
Table 7: IRRRL versus Cash-out Comparison
Feature IRRRL Cash-out Refinancing
Purpose To refinance an existing VA loan at a lower interest rate
To pay off lien(s) of any type - can also provide cash to borrower
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Interest Rate Rate must be lower than on existing VA loan (unless existing loan is an ARM)
Any negotiated rate
Monthly Payment Amount
Payment must be lower than that on an existing VA loan (unless the ARM is being refinanced, a term is shortened, or energy efficiency improvements are being included)
No requirement
Discount Points
Reasonable points can be paid - only two of these points can be included in the loan amount
Reasonable points can be paid - if paid from loan proceeds
Maximum Loan Existing VA loan balance, plus allowable fees and charges, plus up to two discount points, plus the cost of any energy efficiency improvements, plus the VA funding fee
100 percent of the reasonable value of the property indicated on the NOV, plus the cost of any energy efficiency improvements, plus the VA funding fee
Maximum Guaranty
Guaranty is at least 25 percent in all cases (See Topic 1, subsection h of this chapter)
Maximum guaranty is the same as for purchases
Entitlement Veteran re-uses the entitlement used on the existing VA loan - the IRRRL does not impact the amount of entitlement the Veteran has in use
Must have sufficient available entitlement - if existing VA loan on the same property is being refinanced, entitlement can be restored for the refinance
Fees and Charges in the Loan
All allowable fees and charges, including up to two discount points, may be included in the loan
Allowable fees and charges and points may be paid from the loan proceeds
Cash to Borrower
Not permitted Borrower can receive cash for any purposes acceptable to the lender
Lien/Owner- ship
Must be secured by first lien - Veteran must own property
Must be secured by first lien - Veteran must own property
Refinance of Other Liens
Cannot refinance other liens - can only refinance the existing VA loan
Can refinance any type of lien(s)
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Maximum Loan Term
Existing VA loan term plus 10 years, not to exceed 30 years + 32 days
30 years + 32 days
Occupancy Veteran or spouse of an active duty servicemember must certify to prior occupancy
Veteran or spouse of an active duty servicemember must certify as to intent to occupy
Appraisal No appraisal is required Appraisal is required
Credit Underwriting
No underwriting is required except in certain cases
Full credit information and underwriting are always required
Automatic Authority
All lenders can close IRRRLs automatically, except if the loan being refinanced loan is 30 days or more past due, prior approval is always required
Only lenders with automatic authority can close these loans automatically
Law 38 U.S.C. 3710(a)(8) 38 U.S.C. 3710(a)(5)