Couple reviewing iQRATE Mortgages VA loan details.

Is Your San Diego VA IRRRL Offer a Good Deal? How to Tell

Q: Why might the VA IRRRL interest rate I qualify for be different from the advertised rate?

A lender's seasoning period is a mandatory waiting time after you purchase or refinance a property before you can access the full after-repair value (ARV) for a cash-out refinance. Most DSCR lenders require a seasoning period of 6 to 12 months. Refinancing before the seasoning period concludes typically means the lender will base the loan amount on your original purchase price plus rehab costs, which severely limits the amount of equity you can cash out. Waiting until after the period allows you to borrow against the full market value you created through your renovations.

Q: What is the 'recoup period' and why is it important for a VA streamline refinance?

To justify a higher appraised value, you should provide the appraiser with a detailed and organized renovation packet. This packet removes guesswork and provides concrete evidence of the work performed. It should include: a cover letter summarizing the major upgrades, a detailed scope of work document itemizing all improvements, compelling before-and-after photos showing the property's transformation, copies of paid invoices and receipts for materials and labor, and copies of any official building permits that were issued for the work.

Q: Are 'no-cost' VA IRRRLs actually free?

No, LTV limits for cash-out refinances vary significantly among different DSCR lenders, as each has its own guidelines and risk tolerance. While purchase loans may reach 80% LTV, cash-out refinances are often capped at 70% or 75% LTV. The specific LTV offered to an investor is influenced by several factors, including: Credit Score (higher scores typically qualify for higher LTVs), DSCR Ratio (a stronger income-to-debt ratio may result in a better LTV offer), Property Type (a single-family home might receive a higher LTV than a multi-unit property), and Loan Amount (some lenders may offer different terms based on the size of the loan).

Q: What are the main eligibility requirements for a VA IRRRL?

Your property's monthly rental income is the foundation of a DSCR loan approval. The formula is: DSCR = Gross Rental Income / Total Monthly Housing Payment. A higher rent results in a higher DSCR. This proves to the lender that the property can comfortably support a larger loan payment, which in turn allows you to qualify for a larger loan amount and maximize your cash-out.

Q: What common fees should I look for on a VA IRRRL Loan Estimate?

Yes, it is often possible to pay for closing costs with the proceeds from your new loan, meaning you don't need to bring cash to closing. However, these costs are not added on top of your loan limit. Instead, the closing costs are subtracted from the total cash-out funds available to you after your existing mortgage is paid off. The total loan amount, including these costs, cannot exceed the lender's maximum LTV limit based on the property's appraised value.

Q: How do discount points work on a VA refinance?

Investors can make several avoidable errors that reduce their available cash-out funds. The most common mistakes include: Poor Documentation (failing to provide an appraiser with a thorough renovation packet can lead to a conservative and lower valuation), Refinancing Too Soon (not waiting for the lender's seasoning period to expire is a costly mistake that forces the loan to be based on cost rather than value), Lacking a Tenant (attempting to refinance a vacant property is less favorable, as lenders prefer the security of a signed lease over estimated market rents), and Ignoring Lender Differences (accepting the first loan offer without comparing options can mean missing out on better LTV limits or shorter seasoning requirements from other lenders).

Q: Do I have to use my current mortgage lender for a VA IRRRL?

The ideal time to begin the refinance process is 30 to 45 days before your lender's seasoning period expires. This allows you to gather all necessary documentation, secure an appraisal, and complete underwriting so that you can close immediately once the seasoning requirement is met. Crucially, by this time, the property should also be 'stabilized,' which means you have a qualified tenant in place with a signed lease and have collected at least the first month's rent.

February 27, 2026

Specialized In Jumbo Loans, Investor Loans, DSCR Loans, Non-QM Financing, Commercial Mortgages, and Tax-Informed Lending Strategies

Published By

David Ghazaryan

Owner / Broker / Banker

Contact Me At

(702) 766-3744

NMLS 1486726

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TL;DR

Verify Advertised Rates: Learn why the low VA IRRRL interest rates in mailers are often just marketing. The actual rate you qualify for depends on your credit score, whether you purchase discount points, and the loan lock period. The only way to know your true rate is by reviewing an official Loan Estimate.
Identify Hidden Fees: Understand the common costs associated with a VA refinance that can increase your loan amount. Scrutinize your Loan Estimate for charges like origination fees, discount points, third-party costs, and the mandatory VA Funding Fee to avoid surprises.
Calculate Your Break-Even Point: Discover how to use the 'recoup period' calculation (Total Closing Costs ÷ Monthly Savings) to determine how many months it will take for your savings to cover the refinance expenses. This is essential for deciding if the loan is financially beneficial for you.

Learn more about this in this YouTube Video: VA IRRRL Refinance: Avoid These 3 Costly Mistakes!

How to Know if Advertised VA IRRRL Rates Are Legitimate

If you're a veteran homeowner in San Diego or Oceanside, your mailbox is likely full of offers for a VA Interest Rate Reduction Refinance Loan (IRRRL), often called a 'Streamline Refinance'. These mailers promise incredibly low rates, but it's crucial to approach them with healthy skepticism. An advertised rate is a marketing tool, not a guarantee.

The rate you actually qualify for depends on several factors:

Your Credit Score: While the VA IRRRL program is known for not having a minimum credit score requirement set by the VA itself, individual lenders impose their own standards. A lender might advertise a 5.5% rate but reserve it for borrowers with a 740+ credit score. (The data, information, or policy mentioned here may vary over time.) If your score is 640, your offered rate will be higher.
Discount Points: The rock-bottom rate you see in an ad often includes the cost of 'discount points'. One point typically costs 1% of the loan amount and can lower your interest rate by about 0.25%. (The data, information, or policy mentioned here may vary over time.) The advertisement conveniently leaves out the fact that you have to pay thousands of dollars upfront to 'buy down' the rate to that advertised level.
Loan Lock Period: Interest rates change daily. The advertised rate may have been available yesterday for a 15-day lock period. (The data, information, or policy mentioned here may vary over time.) If you need a 30 or 45-day lock to close your loan, the rate will likely be higher to account for market volatility.

The only way to know the legitimate rate you can get is to receive a Loan Estimate (LE). This standardized document prevents lenders from hiding information and shows you the exact rate, points, and fees associated with your specific loan scenario.

What Are the Common Hidden Fees in a Refinance Offer?

Predatory lenders often mask the true cost of a refinance with a confusing fee structure. The VA limits the fees lenders can charge on an IRRRL, but you still need to be vigilant. Scrutinize your Loan Estimate for these common costs:

A homeowner reviewing a loan estimate document for hidden fees.

Origination Fee: The VA allows lenders to charge a flat fee of up to 1% of the loan amount to cover their administrative costs. (The data, information, or policy mentioned here may vary over time.) Some lenders advertise 'no origination fee' but make up for it with higher rates or other charges.
Discount Points: As mentioned, these are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is an optional cost. If you see points on your estimate that you didn't ask for, question them immediately.
Third-Party Fees: These are charges for services performed by entities other than the lender. They can include:
- Credit report fee
- Title insurance and settlement fees
- Recording fees
- VA Funding Fee (This is a mandatory fee paid to the VA, not the lender. It's 0.5% of the loan amount for all IRRRLs, though some veterans are exempt.)

Be wary of vague charges labeled 'processing fee', 'underwriting fee', or 'application fee'. These are often just junk fees that a reputable lender will not charge on a VA loan.

Calculating the Recoup Period for a San Diego Loan

The most important calculation you can make when evaluating an IRRRL offer is the recoup period, also known as the break-even point. This tells you how many months it will take for your monthly savings to pay back the total closing costs.

The formula is simple:

Total Closing Costs / Monthly Savings = Months to Recoup

Calculating the recoup period for a VA IRRRL on a calculator.

A shorter recoup period is always better. Let's run a realistic example for a home in San Diego. (The data, information, or policy mentioned here may vary over time.)

Current Loan Balance: $650,000
Current Interest Rate & Payment: 7.0% rate, with a principal and interest (P&I) payment of $4,324
New IRRRL Offer: 5.75% rate, with a new P&I payment of $3,789
Monthly Savings: $4,324 - $3,789 = $535
Total Closing Costs (including VA Funding Fee): $8,500

Now, let's calculate the recoup period:

$8,500 (Total Costs) / $535 (Monthly Savings) = 15.8 months

In this scenario, it would take you just under 16 months to break even. If you plan to stay in your San Diego home for at least two years, this refinance is a financially sound decision. However, if you thought you might sell or refinance again within a year, the costs would outweigh the benefits.

Does a True 'No-Cost' Interest Rate Reduction Refinance Loan Exist?

Many mailers will advertise a 'no-cost' or 'no out-of-pocket' IRRRL. This sounds great, but it's important to understand there is no such thing as a free loan. The costs don't just disappear; they are paid for in one of two ways:

Rolling Costs into the Loan: This is the most common method. The lender adds all closing costs, including the VA Funding Fee, on top of your existing loan balance. You don't bring cash to closing, but your new loan amount is higher than your old one. You are now paying interest on those closing costs for the life of the loan.
Lender Credits (Higher Interest Rate): In this scenario, the lender agrees to pay for some or all of your closing costs. In exchange, you accept a higher interest rate than you would otherwise qualify for. For example, you might be offered a 6.0% rate with a credit to cover all costs, when you actually qualify for a 5.75% rate if you paid the costs yourself. (The data, information, or policy mentioned here may vary over time.) The lender makes up the money over time through the higher interest payments.

A 'no-cost' IRRRL is a marketing term. You are always paying for it, either through a larger loan balance or a higher interest rate.

When Does It Make Sense to Add Closing Costs Into the New Loan Balance?

Rolling closing costs into your new loan balance can be a smart strategy, particularly for homeowners in high-cost areas like Oceanside. The primary benefit is that it allows you to refinance and lower your monthly payment without needing to have thousands of dollars in cash available for closing.

It makes sense to roll in costs when:

You meet the VA's 'Net Tangible Benefit' test, which ensures the refinance is genuinely beneficial to you.
The monthly savings are substantial enough to justify the slightly larger loan amount.
You lack the liquid cash to pay for costs upfront but want to secure a lower rate immediately.

It might not make sense if:

The costs are excessively high, and rolling them in significantly increases your loan-to-value ratio.
The monthly savings are minimal, and the recoup period is very long.

Key Questions to Ask Any Lender Offering You This Refinance

When you speak with a lender, whether they are in Coronado or across the country, you need to be in control of the conversation. Arm yourself with these specific questions to cut through the sales pitch and get the facts:

'Can you please send me an official Loan Estimate? I don't want to proceed based on a worksheet or verbal quote.'
'What is the total loan amount, including all rolled-in fees and the VA Funding Fee?'
'What is the interest rate and the Annual Percentage Rate (APR)?' (The APR includes fees and is a more accurate measure of the loan's cost).
'Are there any discount points included in this rate? If so, how much do they cost and what would the rate be without them?'
'Is there a prepayment penalty on this loan?' (VA loans are not allowed to have prepayment penalties, but asking confirms the lender knows the rules).
'What is the total cash I need to bring to closing, if any?'
'What is your lender origination fee?'

Can I Use a Different Lender Than My Original One in Coronado?

Yes, absolutely. You are not obligated to use your current mortgage servicer for a VA IRRRL. In fact, you are strongly encouraged to shop around with multiple lenders.

Your current lender may have your information on file, making the process slightly faster, but that convenience could cost you. Another lender might offer a lower interest rate, charge fewer fees, or provide better customer service. By comparing offers from at least three different lenders, including mortgage brokers, local banks, and national companies, you ensure you are getting the most competitive deal available.

What Are the VA Requirements for This Streamline Refinance?

The VA IRRRL program is popular because it streamlines the refinancing process, reducing the paperwork and underwriting required. The core requirements are straightforward:

Existing VA Loan: You must be refinancing an existing VA-guaranteed loan. You cannot use an IRRRL to refinance a conventional or FHA loan.
Occupancy: You must certify that you previously occupied the property as your home. You do not need to be currently living there, which makes IRRRLs a great option for refinancing a property that is now a rental.
Net Tangible Benefit (NTB): The refinance must provide a clear benefit to you. This usually means lowering your interest rate and principal and interest payment. There are specific rules, such as the new rate being at least 0.5% lower than the old rate if going from a fixed rate to another fixed rate.
VA Funding Fee: As noted, a 0.5% funding fee is required unless you are a veteran receiving VA disability compensation or an eligible surviving spouse. If you've received a VA IRRRL offer that seems too good to be true, it pays to get a second opinion. A qualified mortgage expert can review your Loan Estimate, expose hidden fees, and ensure the refinance truly aligns with your financial goals.

Navigating VA IRRRL offers can be complex. If you're ready for a straightforward look at your potential savings with a transparent Loan Estimate, take the next step. Apply now to get a clear picture of your refinancing options.

Author Bio

David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.