VA Cash-Out Refinancing Loan Guidelines
If you have an existing VA home loan, an FHA mortgage, sub-prime loan or conventional mortgage and want to refinance into a new VA home loan, the Department of Veterans Affairs has a program offered by participating lenders that you should ask questions about--the VA Cash Out Refinancing Loan.
With a VA Cash Out Refinance, qualified VA loan applicants are permitted to apply for a new loan that pays off the first mortgage AND allows cash back on the transaction to the borrower after the old loan is paid off. Cash back can be used to pay VA loan discount points, fees and charges, or for other non-loan related uses that are approved by the financial institution offering the loan.
What does the VA official site (www.VA.gov) have to say about cash out loans? For a start, we learn that a VA cash out loan is, “a VA-guaranteed loan that refinances any type of lien or liens against the secured property. 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.”
Your VA cash out refinancing loan “must be secured by a first lien on the property” and you can apply to receive up to 100 percent of the appraised value of the home, plus the VA loan funding fee and the cost of any energy efficiency improvements according to the VA Lender’s Handbook, VA Pamphlet 26-7.
Unlike VA Interest Rate Reduction Refinancing Loans (which never allow cash back to the borrower), cash out refinancing uses the borrower’s VA loan entitlement. If a borrower has a first VA home loan which is not currently paid off, can that borrower apply for cash-out refinancing? The VA official site says this IS possible.
While the borrower must have “sufficient available entitlement for the loan”, VA rules 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.”
Speak to a participating loan officer about your VA Cash Out Refinance loan options.