VA refinance

VA Cash-Out Refinancing Loan Basics

May 23, 2011

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VA Cash-Out Refinancing Loan Basics

There are a variety of options VA borrowers have when it’s time to consider refinancing a home loan. One of those options is the VA cash-out refinancing loan. Those who have examined this option in the past may not be aware of changes to the cash-out refinancing loan program; VA rules once limited these loans to 90%, but since the Veterans’ Benefits Improvement Act of 2008, cash-out refinancing can now be made for up to 100% of the value for qualified borrowers.

For those unfamiliar with the VA cash-out refinancing program, this type of VA insured loan refinances “any type of lien or liens against the secured property.” At the time of this writing, VA rules allow the liens to be current or delinquent, and from “any source” including “tax or judgment liens, or VA, FHA, or conventional mortgages.”

Cash-out loans insured by the VA allow the borrower to take cash proceeds from the loan above and beyond the amount needed to pay off the liens “for any purpose acceptable to the lender.”

VA rules for cash-out refinancing loans state, “The loan must be secured by a first lien on the property.” The VA allows cash out from the loan to pay for allowed fees, charges, discount points, etc.

Unlike a VA Interest Rate Reduction Refinancing Loan, the VA requires the borrower to have “sufficient available entitlement for the loan.” VA requirements also add, “If an existing VA loan on the same property will be paid off by the refinancing loan, the entitlement used for that existing loan can be restored for purposes of obtaining the new loan.”

Occupancy requirements for a cash-out loan are the same as a typical VA home loan–the borrower must certify the home being refinanced is the primary residence. This is not the case for VA Interest Rate Reduction Refinancing Loans, where the borrower must certify only that the home was the primary residence in the past.

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2 Comments
  1. michael weller

    I have a situation,I think this program just may be able to help me out,I purchased my manufactured home attached to it's land 2 yrs ago the price I pd. was $75000, I put $20,000 cash down, i only owe roughly $51,000 but I have a few issues on my credit,I am intitled to a VA. loan I was in the USMC 1985 to 1993, I am wondering if we could not refinance this home with a VA. loan and use some of the equity to pay off about $6000.00 I have showing delinquit on my credit reports. I have a very high interest rate at present,and I pay my tax's and home owners insurance out of pocket,this puts me in a very tight place each month,just wondering if this is a do able situation???

    • Joe Wallace

      I would encourage you to consider VA refinancing if you have an interest rate that is too high, but if you have credit problems within the last 12 months you'll be required to explain the issues in writing. VA refinancing loan proceeds may, depending on the type of loan, be limited--for example, VA Interest Rate Reduction Refinancing loans allow no cash back to the borrower. VA Cash-Out Refinancing requires a standard credit check and application procedures the way you would apply for any home loan. Cash from a cash-out refinancing loan can be used for "any purpose acceptable" to the lender. There are many variables when applying for refinancing. Best advice is to contact the nearest VA Regional Loan Center and ask them for advice on your specific situation as it applies to the possibility of getting a VA refinancing loan to get you a better interest rate, if possible. Try calling 1-888-244-6711 for more information.

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