Government interest rate reduction program

If you have an existing VA-backed home loan and you want to reduce your monthly mortgage payments—or make your payments more stable—an interest rate reduction refinance loan IRRRL may be right for you. Refinancing lets you replace your current loan with a new one under different terms. Get the latest information about concerns like managing VA debt, or paying your VA copays or VA-backed home loan during this time.

Go to our coronavirus FAQs. Note: If you have a second mortgage on the home, the holder must agree to make your new VA-backed loan the first mortgage. You can borrow more than this amount if you want to make a down payment. Learn about VA home loan limits. Terms and fees may vary, so contact several lenders to check out your options. To qualify for a streamline refinance, the homeowner must meet several qualifications. The home must currently be financed by an FHA loan and the loan must have current payments for the last 12 months.

The refinance must result in a lowering of both the interest and payments for the homeowner. The homeowner must provide proof of employment.

A streamline refinance does not require a credit approval or meet debt-to-income requirements. There are three ways a streamline FHA refinance can be structured. If the homeowner elects to pay the closing costs, the new mortgage will start with a principal balance equal to the current balance of the existing mortgage.

The new loan will be financed at the current FHA interest rate. Some lenders offer a "no-cost" streamline refinance by charging a higher interest rate and using the profits from the premium rate to pay the closing costs. The rate will still be below the rate for the existing mortgage and the homeowner will have no out-of-pocket cost. USDA borrowers will be eligible to reduce their monthly payments by 20 percent. VA borrowers can also see a 20 percent mortgage payment reduction.

Though in some cases, larger cuts may be possible. Servicers may also extend VA loan terms up to months, or 40 years total. For struggling homeowners with conventional or conforming loans, there are other relief options available. The program offers borrowers a 20 percent reduction in their monthly principal and interest costs, as well as term extensions of up to 40 years. Your servicer is typically not the same lender you originally applied with especially if you have a Fannie Mae or Freddie Mac-owned loan.

Not sure if you fall into that category? In both cases, forbearance is available for up to 18 months total.