source:
  type: guide
  id: va-m26-7-ch06-t01
  authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 6, Topic 1 — Interest
    Rate Reduction Refinancing Loans (IRRRLs)
  description: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 6, Topic 1 — Interest
    Rate Reduction Refinancing Loans (IRRRLs).
  coverage_tier: operative
obligations:
- id: va-m26-7-ch06-t01-full
  canonical_id: va-m26-7-ch06-t01-full
  section: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 6, Topic 1 — Interest Rate
    Reduction Refinancing Loans (IRRRLs)
  type: do
  tags:
  - regulator-direct
  - va
  - va-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 6, Topic 1 — Interest
      Rate Reduction Refinancing Loans (IRRRLs)
    source_class: va-handbook
    source_url: https://www.benefits.va.gov/warms/pam26_7.asp
    snapshot_id: e9c94ae5dc0a61f0
    fetched_at: '2026-05-23T01:53:53Z'
    content_hash: sha256:3cffeec90efad00b76c2984956a10f10bd9f0b99880c94bd3c269192cfe674f5
    paragraph_quote: '1. Interest Rate Reduction Refinancing Loans (IRRRLs) Change
      Date April 10, 2009, Change 11 • This section has been changed to update hyperlinks
      and to make minor grammatical edits. a. What is an IRRRL? An IRRRL is a VA-guaranteed
      loan made to refinance an existing VA- guaranteed loan, generally at a lower
      interest rate than the existing VA loan, and with lower principal and interest
      payments than the existing VA loan. Generally, no appraisal, credit information
      or underwriting is required on an IRRRL, and any lender may close an IRRRL automatically.
      Note: Exceptions and specific requirements are explained in the remainder of
      this section. b. Interest Rate Decrease Requirement An IRRRL (which can be a
      fixed rate, hybrid Adjustable Rate Mortgage (ARM) or traditional ARM) must bear
      a lower interest rate than the loan it is refinancing unless the loan it is
      refinancing is an ARM. c. Payment Decrease/ Increase Requirements The principal
      and interest payment on an IRRRL must be less than the principal and interest
      payment on the loan being refinanced unless one of the following exceptions
      applies: • the IRRRL is refinancing an ARM, • term of the 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
      two discount points, • financing of the funding fee, and/or • higher interest
      rate when an ARM is being refinanced. Continued on next page VA Pamphlet 26-7,
      Revised Chapter 6: Refinancing Loans 6-3 1. Interest Rate Reduction Refinancing
      Loans (IRRRLs), Continued c. Payment Decrease/ Increase Requirements (continued)
      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. d. Veteran’s Statement and Lender’s Certification For all IRRRLs, 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
      interest rate and monthly payments for the new loan versus that for the old
      loan. The statement must also indicate how long it would take to recoup ALL
      closing costs (both those included in the loan and those paid outside of closing).
      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. Example: • Vet’s monthly
      payment decreases by $50.00. • Vet pays $5,000 in closing costs (includes all
      costs – closing costs, funding fee, discounts, etc). • Recoup closing costs
      in 100 months - $5,000 divided by $50. Note: This would not be required in those
      limited cases where the payment is not decreasing (reduced term of loan, etc.).
      The veteran’s statement may be combined with the lender’s certification and
      should be on the lender’s own letterhead. For a sample please go to: http://www.homeloans.va.gov/docs/VA_Rate_Reduction_Cert.pdf.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 6: Refinancing Loans
      6-4 1. Interest Rate Reduction Refinancing Loans (IRRRLs), Continued e. What
      Closing Costs can be Included in the Loan? The following fees and charges may
      be included in an IRRRL: • the VA funding fee, and • any allowable fees and
      charges discussed in section 2 of chapter 8; such as, all allowable closing
      costs, including the lender’s flat charge. However, There Is One Limitation
      While the borrower may pay any reasonable amount of discount points in cash,
      only up to two discount points can be included in the loan amount. Although
      VA does not require an appraisal or credit underwriting on IRRRLs, any customary
      and reasonable credit report or appraisal expense incurred by a lender to satisfy
      its lending requirements may be charged to the borrower and included in the
      loan. The lender may also set the interest rate on the new loan high enough
      to enable the lender to pay all closing costs, as long as the requirements for
      lower interest rate and payments (or one of the exceptions to those requirements)
      are met. For IRRRLs to refinance loans 30 days or more past due (which must
      be submitted for prior approval), the following can be included in the new loan:
      • late payments and late charges on the old loan, and • reasonable costs if
      legal action to terminate the old loan has commenced. f. When Can the Borrower
      Receive Cash at Closing? An IRRRL 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. Continued on next page VA Pamphlet 26-7, Revised Chapter 6: Refinancing
      Loans 6-5 1. Interest Rate Reduction Refinancing Loans (IRRRLs), Continued f.
      When Can the Borrower Receive Cash at Closing? (continued) Note: Use of loan
      proceeds for energy efficiency improvements not involving cash reimbursement
      of the veteran is also an option. See section 3 of chapter 7. In a limited number
      of situations, the borrower may receive cash at closing. Some examples of situations
      in which VA does not object to the borrower receiving cash are: • computational
      errors, • changes in final pay-off 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. VA does not set a “ceiling” or a specific
      dollar limitation on cash refunds resulting from adjustments at closing. However,
      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.
      g. Maximum Loan Always use VA Form 26-8923, IRRRL Worksheet, to calculate the
      maximum loan amount. The maximum loan amount is the existing VA loan balances
      plus the following: • including any late payments* and late charges, plus •
      allowable fees and charges (includes up to two discount points), plus • the
      cost of any energy efficiency improvements, and • the VA funding fee. *Any IRRRL
      that includes delinquent payments in the loan amount must be submitted for prior
      approval, even when a lender has automatic authority. Continued on next page
      VA Pamphlet 26-7, Revised Chapter 6: Refinancing Loans 6-6 1. Interest Rate
      Reduction Refinancing Loans (IRRRLs), Continued g. Maximum Loan (continued)
      Note: There is no maximum dollar amount for VA loans. Since an IRRRL rolls the
      above items into the new loan, and VA guarantees at least 25 percent of the
      loan amount (without regard to the veteran’s entitlement), the new loan amount
      may be more than the limits established by the secondary market. It is the lender’s
      responsibility to ensure it has a marketable loan. h. Amount of Guaranty and
      Entitlement Use No additional charge is made to the veteran’s entitlement for
      an IRRRL; such as, the amount of the veteran’s previously used and available
      entitlement remains the same before and after obtaining the IRRRL. The new IRRRL
      loan amount may be equal to, greater than, or less than, the original amount
      of the loan being refinanced. This may impact the amount of guaranty on the
      new loan, but not the veteran’s use of entitlement. Example Of New Loan Amount
      More Than Old Loan The existing VA loan was originally made for $110,000 with
      a guaranty of $27,500, or 25 percent. The new IRRRL is for $112,000. The guaranty
      on the new loan is $28,000 or 25 percent, but the veteran’s entitlement use
      remains at $27,500. Example Of New Loan Amount Less Than Old Loan The existing
      VA loan was originally made for $42,000 with a guaranty of $25,000, or almost
      60 percent (the percentage applicable under former law). The new IRRRL is for
      $40,000. The guaranty on the new loan is $20,000 or 50 percent, but the veteran’s
      entitlement use remains at $25,000. Amount How to calculate the amount of guaranty
      on an IRRRL IRRRLs up to $45,000 First, calculate the lesser of: • 50 percent
      of the IRRRL loan amount, or • the amount of guaranty used on the VA loan being
      refinanced. The amount of guaranty is the greater of: • the above result, or
      • 25 percent of the IRRRL loan amount. Continued on next page VA Pamphlet 26-7,
      Revised Chapter 6: Refinancing Loans 6-7 1. Interest Rate Reduction Refinancing
      Loans (IRRRLs), Continued h. Amount of Guaranty and Entitlement Use (continued)
      Amount How to calculate the amount of guaranty on an IRRRL IRRRLs of $45,001
      to $56,250 First, calculate the lesser of: • $22,500, or • the amount of guaranty
      used on the VA loan being refinanced. The amount of guaranty is the greater
      of: • the above result, or • 25 percent of the IRRRL loan amount. IRRRLs of
      $56,251 to $144,000 First, calculate the lesser of: • 40 percent of the IRRRL
      loan amount, or • the amount of guaranty used on the VA loan being refinanced.
      The amount of guaranty is the greater of: • the above result, or • 25 percent
      of the IRRRL loan amount. IRRRLs greater than $144,000 Guaranty on these is
      always 25 percent of the IRRRL loan amount. i. Maximum Loan Term The maximum
      loan term is the original term of the VA loan being refinanced plus 10 years,
      but not to exceed 30 years and 32 days. For example, if the old loan was made
      with a 15-year term, the term of the new loan cannot exceed 25 years. j. Title/Lien
      Requirements The IRRRL must replace the existing VA loan as the first lien on
      the same property. Any second lien-holder would have to agree to a subordinate
      to the first lien holder. • The borrower cannot pay off liens other than the
      existing VA loan from IRRRL proceeds. • The veteran (or surviving co-obligor
      spouse) must still own the property. Continued on next page VA Pamphlet 26-7,
      Revised Chapter 6: Refinancing Loans 6-8 1. Interest Rate Reduction Refinancing
      Loans (IRRRLs), Continued k. Who Can an IRRRL be Made to? Generally, the party(ies)
      obligated on the original loan must be the same on the new loan (and the veteran
      must still own the property). The lender should contact VA regarding a proposed
      IRRRL involving a change in obligors unless the acceptability of the IRRRL is
      clear. Sample cases are provided in the table in this subsection. Examples:
      In Case 7, the divorced spouse is keeping the home and wishes to refinance.
      The spouse cannot get an IRRRL unless the veteran agrees to be obligated on
      the new loan and commit his or her entitlement to the new loan. A person without
      entitlement cannot get an IRRRL or any other type of VA loan. In Cases 8 through
      10, the applicants cannot obtain an IRRRL because they do not include the veteran
      or a person who was the veteran’s spouse at the time the original loan was made,
      and who was obligated on the loan along with the veteran. In the case of the
      unmarried veteran obtaining the original loan (Case 8): • the marriage and death
      of the veteran occurred after the loan was made, and • the deceased veteran’s
      spouse is not obligated on the original loan. Thus, an IRRRL is not possible.
      In the case of the veteran and spouse obligated on the original loan (Case 9):
      • the divorce, remarriage, then death of the veteran occurred after the loan
      was made and, the deceased veteran’s new spouse is not obligated on the original
      loan. Thus, an IRRRL is not possible. Continued on next page VA Pamphlet 26-7,
      Revised Chapter 6: Refinancing Loans 6-9 1. Interest Rate Reduction Refinancing
      Loans (IRRRLs), Continued k. Who Can an IRRRL be Made to? (continued) In the
      case of the veteran/nonveteran joint loan (Case 10): • the veteran “sold out”
      to the nonveteran co-obligor after the loan was made and, • the veteran no longer
      has any ownership interest in the property. Thus, an IRRRL is not possible.
      Parties Obligated on Old VA Loan Parties to be Obligated on new IRRRL Is IRRRL
      Possible? 1 Unmarried veteran Veteran and new spouse Yes 2 Veteran and spouse
      Divorced veteran alone Yes 3 Veteran and spouse Veteran and different spouse
      Yes 4 Veteran alone Different veteran who has substituted entitlement Yes 5
      Veteran and spouse Spouse alone (veteran died) Yes 6 Veteran and nonveteran
      joint loan obligors Veteran alone Yes 7 Veteran and spouse Divorced spouse alone
      No 8 Unmarried veteran Spouse alone (veteran died) No 9 Veteran and spouse Different
      spouse alone (veteran died) No 10 Veteran and nonveteran joint loan obligors
      Nonveteran alone No l. Underwriting of IRRRLs When Obligors Have Changed Although
      VA does not require any credit/income documentation or re-underwriting of IRRRLs
      when there has been a change in obligors, lenders may want to consider the following:
      • Check mortgage payment record in lieu of obtaining a full credit report, unless
      required by investor. • For death or divorce cases, obtain a statement from
      the obligor(s) on the ability to make payments on the new loan without the co-obligor’s
      income. • Obtain a statement about the addition of a different spouse, change
      in number of dependents, as applicable. Continued on next page VA Pamphlet 26-7,
      Revised Chapter 6: Refinancing Loans 6-10 1. Interest Rate Reduction Refinancing
      Loans (IRRRLs), Continued l. Underwriting of IRRRLs When Obligors Have Changed
      (continued) The lender should satisfy itself that the lower payment and interest
      rate, and the minimum 25 percent guaranty compensate for no re-underwriting
      on the new loan when there has been a change in obligors. m. Occupancy For IRRRLs,
      the veteran or the spouse of an active servicemember must certify that he or
      she previously occupied the property as his or her home. This is different than
      the requirement for non-IRRRL VA loans that the veteran must intend to personally
      occupy the property as his or her home. Reference: See chapter 3 for details.
      n. VA Loan Identification Number Request a new loan number for each IRRRL through
      The Appraisal System (TAS), without requesting an appraisal. o. Credit Underwriting
      No credit information or underwriting is required unless: • the loan to be refinanced
      is 30 days or more past due (see section 2 of this chapter) or, • the monthly
      payment (PITI) will increase 20 percent or more. Reference: See subsection d
      of this section. A borrower with a recent Chapter 13 bankruptcy may need approval
      of the trustee for the new loan. p. Prior Approval Procedures An IRRRL can be
      closed on an automatic basis by any lender (such as, a lender with or without
      automatic authority to close other types of loans on an automatic basis) in
      any geographic location. Exception: For IRRRLs to refinance existing VA loans
      30 days or more past due, VA prior approval is needed (see section 2, subsection
      a of this chapter). Continued on next page VA Pamphlet 26-7, Revised Chapter
      6: Refinancing Loans 6-11 1. Interest Rate Reduction Refinancing Loans (IRRRLs),
      Continued p. Prior Approval Procedures (continued) A lender may choose to submit
      an IRRRL for prior approval, even if the existing loan is not 30 days or more
      past due. In such cases, submit only items 1 through 10 (and 17, if applicable)
      of the information listed under “Prior Approval Submission.” Also include an
      explanation of why the loan is being submitted for prior approval. Submit documents
      on closed prior approval IRRRLs in accordance with the instructions under section
      2, subsection c of this chapter. Note: Prior approval for IRRRLs is not required
      for veteran’s in receipt of nonservice-connected pension or for veterans rated
      incompetent by VA when these veterans meet the requirements of this section.
      q. Procedures for Automatic Processing of IRRRLs An IRRRL can be closed on an
      automatic basis by any lender (such as, a lender with or without automatic authority
      to close other types of loans on an automatic basis) in any geographic location.
      Exception: For IRRRLs to refinance existing VA loans 30 days or more past due,
      VA prior approval is needed. See section 2, subsection a, of this chapter. A
      loan must be reported (such as, all documentation submitted) to VA within 60
      days of closing. A lender that fails to meet this time limit must provide a
      written explanation. (see document #12.) To report a loan, submit the following
      documents to VA in the order listed. Order Document 1 Lender’s cover or transmittal
      letter (if used). 2 VA Form 26-0286, VA Loan Summary Sheet. 3 VA Form 26-8320
      (or 26-8320a), Certificate of Eligibility, or a request for a duplicate certificate
      on VA Form 26-1880, Request for a Certificate of Eligibility. 4 Funding fee
      receipt. Reference: See section 8 of chapter 8 for information on exemptions.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 6: Refinancing Loans
      6-12 1. Interest Rate Reduction Refinancing Loans (IRRRLs), Continued q. Procedures
      for Automatic Processing of IRRRLs (continued) Order Document 5 Statement signed
      by the veteran acknowledging the effect of the refinancing loan on the veteran’s
      loan payments and interest rate. • The statement must show the interest rate
      and monthly payments for the new loan versus that for the old loan. • The statement
      must also indicate how long it will take to recoup ALL closing costs (both those
      included in the loan and those paid outside of closing). • If applicable, the
      veteran’s statement may be combined with the lender’s certification that the
      veteran qualifies for the new monthly payment which exceeds the previous payment
      by 20% or more. 6 VA Form 26-8923, Interest Rate Reduction Refinancing Loan
      Worksheet. 7 VA Form 26-1820, Report and Certification of Loan Disbursement.
      8 VA Form 26-8937, Verification of VA Benefits (if applicable). 9 HUD-1, settlement
      statement. 10 VA Form 26-0503, Federal Collection Policy Notice. 11 Lender’s
      certification that the prior loan was current (not 30 days or more past due)
      at the time of loan closing. 12 If loan is submitted more than 60 days after
      loan closing, a statement signed by a corporate officer of the lender which
      identifies the loan, provides the specific reasons for late reporting and certifies
      that the loan is current. This statement must be submitted with any late request
      for issuance of a Loan Guaranty Certificate. 13 Documentation of the cost of
      energy efficiency improvements included in the loan. For cash reimbursement
      of the veteran, the improvements must have been completed within the 90 days
      immediately preceding the date of the loan. Reference: See section 3 of chapter
      7. 14 Any other necessary documents (see section 6 of chapter 5). VA Pamphlet
      26-7, Revised Chapter 6: Refinancing Loans 6-13'
  judgment: false
