VA Loan Reader Question: 100% Cash Out VA Loan Refinancing
A reader asks, “Can you do 100% cash-out VA loan on a primary residence property zoned AR3? If not, can you do any VA loan on a primary residence property zoned AR3? This means the property is used for rural business and residential use.”
In general, according to Chapter Six of the VA Lender’s Handbook, cash out VA loan refinancing may be issued for up to 100% for qualified borrowers.
“Maximum Guaranty The maximum guaranty for regular (i.e., “cash-out”) refinancing loans is the same as the maximum guaranty for purchase loans. Prior to October 10, 2008, the maximum guaranty had been limited to $36,000. However, guaranty on this type of loan is now computed the same as for purchases (i.e., can vary depending on location).”
There is a caveat for this, however. Cash-out refinancing loans require use of the borrower’s VA loan entitlement. “The veteran must have sufficient available entitlement for the loan. 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 is an issue with VA cash-out refinancing loans–the borrower must certify the property to be refinanced is the primary residence.
Additionally, the residence must be primarily residential in nature–any non-residential use of the property must take up 25% of the total footage of the property or less.
Properties may be of “mixed use” as long as the 25% rule is followed AND the non-residential use of the property is, in the words of the Department of Veterans Affairs, “subordinate to the residential nature” of the home. All local codes and ordinances must also be followed as applicable.