Generally, no appraisal, credit information or underwriting is required on a VA streamline refinance (IRRL), and any lender may close a VA IRRL automatically. By utilizing a VA Streamline Refinance a veterand can save thousand of dollars and be able to enjoy the savings from a VA streamline refinace very quickly.

INTEREST RATE DECREASE REQUIREMENT

An VA Streamline Refinance (IRRRL)(which is always fixed rate) must bear a lower VA interest rate than the loan it is refinancing unless the loan it is refinancing is a VA Adjustable-Rate Mortgage (ARM).

PAYMENT DECREASE/INCREASE REQUIREMENTS

The principal and interest payment on a VA Streamline Refinance (IRRRL) must be less than the principal and interest payment on the VA loan being refinanced unless one of the following exceptions applies:

The VA Streamline Refinance (IRRRL) is refinancing a VA ARM or VA Hydrid ARM
the term of the VA Streamline Refinance (IRRRL) is shorter than the term of the loan being refinanced, or
energy efficiency improvements are included in the IRRRL

A significant increase in the veteran's monthly payment may occur with any of these three exceptions, especially if combined with one or more of the following:

financing of closing costs
financing of up to 2 discount points
financing of the funding fee, and/or
higher interest rate when an VA ARM or VA Hybrid ARM is being refinanced.

If the monthly payment (PITI) increases by 20 percent or more, the lender must

determine that the veteran qualifies for the new payment from an underwriting standpoint; such as, determine whether the borrower can support the proposed shelter expense and other recurring monthly obligations in light of income established as stable and reliable, and
include a certification that the veteran qualifies for the new monthly payment which exceeds the previous payment by 20 percent or more.

VETERAN'S STATEMENT AND LENDER'S CERTIFICATION

For all VA Streamline Refinances (IRRLs), the veteran must sign a statement acknowledging the effect of the refinancing loan on the veteran's loan payments and interest rate.

The statement must show the VA interest rate and monthly payments for the new VA loan versus that for the old VA loan.

If the monthly payment (PITI) increases by 20 percent or more, the lender must include a certification that the veteran qualifies for the new monthly payment which exceeds the previous payment by 20 percent or more.

The veteran's statement may be combined with the lender's certification.

WHEN CAN THE BORROWER RECEIVE CASH AT CLOSING?

A VA Streamline Refinance (IRRL) cannot be used to take equity out of the property or pay off debts, other than the VA loan being refinanced. Loan proceeds may only be applied to paying off the existing VA loan and to the costs of obtaining or closing the IRRRL. Therefore, the general rule is that the borrower cannot receive cash proceeds from the loan. (If necessary, the refinancing loan amount must be rounded down to avoid payments of cash to the veteran.)

The one exception is reimbursement of the veteran for the cost of energy efficiency improvements up to $6,000 completed within the 90 days immediately preceding the date of loan closing.

Note: Use of loan proceeds for energy efficiency improvements not involving cash reimbursement of the veteran is also an option. .

In addition, there are situations which come about at closing which may result in the borrower receiving cash. Some examples of situations for which VA does not object to the borrower receiving cash are

computational errors
changes in final payoff figures
up-front fees paid for the appraisal and/or credit report that are later added into the loan, and
refund of the escrow balance on the old loan. This often occurs when a party other than the present holder originates the loan.

While VA's policy is not to set a "ceiling" or a specific dollar limitation on cash refunds resulting from adjustments at closing, if a situation involves a borrower receiving more than $500, consult VA as to its acceptability. Lenders and VA personnel should exercise common sense when assessing such situations and draw from basic program information to know the difference between an equity withdrawal and cash from unforeseen circumstances.

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