VA refinance

VA Cash Out Refinance Loans: Some Basics

November 14, 2013

VA Cash Out Refinance Loans: Some Basics


VA Cash-Out Refinancing loans are available for qualified applicants for any type of home loan refinance including existing VA mortgages, conventional loans, even FHA-insured loans. Borrowers may take cash out on the refinancing loan once the original mortgage has been paid off and any other fees or expenses to be included in the loan amount are satisfied.

Some of the basics of a VA Cash-Out Refinancing loan include the maximum loan amount, what eligibility requirements the borrower must meet, occupancy, and loan approval procedures. Let’s have a look at some of these basic areas:

Maximum Loan Amount
According to the VA Lender’s Handbook, “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).”

Borrowers who haven’t explored their VA cash out refinancing loan options in several years should do so again to catch up on rule changes and procedural differences that may affect how your loan application is processed today.

How VA Cash Out Loans Affect The Veteran’s Entitlement
As the VA Lender’s Handbook says, the loan applicant must have “sufficient available entitlement for the loan”. VA loan rules permit a borrower using an existing VA loan to re-apply for full VA loan eligibility for the refinance loan as follows: “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 Rules
VA Cash Out Refinance loan occupancy rules are identical to new purchase VA loan rules. The veteran “must certify that he or she intends to personally occupy the property as his or her home.”

VA Refinance Procedures
VA Pamphlet 26-7 tells the lender, “Loan processing procedures are virtually the same as for non-refinancing loans.  A full appraisal, credit information, and underwriting are required.  Generally, follow the procedures described in chapter 5 of this handbook.” Borrowers should expect to pay for an appraisal on a VA Cash-Out Refinance loan the same as they did for the new purchase home loan.

Do you have questions about VA home loans or refinancing loans? Ask us in the comments section.

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