Refinance A Conventional Mortgage To A VA Mortgage
Eligible veterans and currently serving military members can refinance a conventional home loan to a VA mortgage, AND get cash back on the loan where applicable. If you don’t know about the VA Cash Out Refinancing mortgage, now is a great time to explore your options.
VA Pamphlet 26-7 describes the VA Cash Out Refinancing loan as “a VA-guaranteed loan that refinances any type of lien or liens against the secured property.” It also states, “The liens to be paid off may be:
- Current or delinquent, and
- From any source, such as tax or judgment liens, or VA, FHA, or conventional mortgages.”
The new loan has to be secured by a “first lien” on the property to be refinanced, and when it comes to getting cash back on the loan, VA rules say loan proceeds “beyond the amount needed to pay off the lien(s) may be taken as cash by the borrower for any purpose acceptable to the lender.”
The VA Cash Out refinancing loan allows for 100% financing of the appraised value of the home, “plus the cost of any energy efficiency improvements, plus the VA funding fee.” As you might have guessed, VA cash out refinancing does require a new appraisal, and an existing appraisal cannot be used even if it hasn’t expired yet.
Some borrowers may wish to use cash back from the VA refinancing loan to pay for fees, charges and discount points–this is definitely permitted under the Cash Out Loan rules.
Cash out refinancing has the same occupancy requirements as new purchase VA mortgages do. A borrower must certify that he or she intends to live in the property refinanced with the VA Cash Out loan as the primary residence. When it comes to using your VA entitlement for this type of refinancing, VA loan rules tell the lender:
“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.”
Talk to a loan officer about your cash out refinancing options–you may be surprised at your options!
Do you have questions about VA home loans? Ask us in the comments section.