Can you get a cash out refinance with a VA loan?
A VA-backed cash-out refinance loan lets you replace your current loan with a new one under different terms. If you want to take cash out of your home equity or refinance a non-VA loan into a VA-backed loan, a VA-backed cash-out refinance loan may be right for you.
Requirements for a VA cash-out refinance loan
Meet your lender's minimum credit score requirement, generally 620. Meet your lender's debt-to-income (DTI) ratio requirement, generally no more than 41 percent. Demonstrate proof of income. Pay the VA cash-out refinance funding fee.
VA Cash-Out Loan-to-Value (LTV) Requirements
The VA allows qualified Veterans to refinance with a loan-to-value ratio up to 100%. But lenders will often cap LTV at 90% in most cases.
For a cash-out or standard mortgage refinance, first-time borrowers will pay a 2.15% funding fee, while subsequent borrowers pay 3.3%.
For all cash-out refinances paying off an existing VA loan seasoning certification is required. The number of days from closing of loan being refinanced and loan closing of new loan will auto-calculate and cannot be less than 210 (days) or the guaranty will not be issued.
Generally, the amount you can borrow with a cash-out refinance is capped at 80% of your home value. However, this can vary depending on the lender and loan type you choose.
The VA Cash-Out Refinance requires that you already have a mortgage on your property. If you own your home free and clear and no longer have a mortgage, you will need to explore other options for getting access to your equity.
Today's national VA mortgage interest rate trends
For today, Monday, April 22, 2024, the national average 30-year VA mortgage interest rate is 7.28%, up compared to last week's of 7.17%. The national average 30-year VA refinance interest rate is 7.77%, up compared to last week's rate of 7.68%.
A cash-out refinance comes with closing costs comparable to your first mortgage. Typically, you can expect to pay between 2% and 5% of the loan amount. So on a $200,000 home loan refinance, you could pay between $4,000 and $10,000 in closing costs.
To refinance with a VA home loan, you'll have to meet the required waiting period of 212 days or 6 payments' worth of time – whichever period is longer. You can expect this required waiting period regardless of which VA refinancing option you choose.
Who pays closing costs on a VA loan?
Who pays closing costs on a VA loan? The buyer is typically responsible for paying for things like the VA funding fee, loan origination fee and more. However, the seller might be able to contribute; they can pay closing costs up to 4 percent of the total home loan price.
Because of the most recent cost-of-living adjustment, payments to veterans have increased by 3.2%. The next payment will be issued on Wednesday, May 1, 2024, and many veterans will be receiving at least $3,000.
A VA-backed cash-out refinance loan lets you replace your current loan with a new one under different terms. If you want to take cash out of your home equity or refinance a non-VA loan into a VA-backed loan, a VA-backed cash-out refinance loan may be right for you.
To qualify for a VA IRRRL, you must have a current VA loan that's been open for at least 7 months (210 days). You must also be current on your mortgage payments, and the new loan must have a clear financial benefit.
Lender Requirements
In addition, the home that you're refinancing must also be your primary residence. To convert your total home equity into cash with Rocket Mortgage® you must have a minimum credit score of 620. If your credit score is below 620, you can only cash out 90% of your home's equity.
When it comes to the amount of equity you can access, a VA refinance with cash out is more lenient than a conventional cash-out refi. The VA allows you to take out up to 100% of your home's value. Many lenders will approve up to just 90%, but even that is higher than the conventional standard of 80%.
VA Refinance Loan | Funding Fee |
---|---|
Cash-out refinance — first use | 2.15% |
Cash-out refinance — subsequent use | 3.3% |
VA IRRRL Loan | 0.5% |
Cash-out refinancing reduces your equity. Decreasing your equity could put you at greater risk of ending up underwater on your loan and being unable to pay it off should home values drop and you need to sell.
You'll typically need a home appraisal to refinance your mortgage, both to confirm your home's value and to set your new loan amount. If your refinance appraisal comes in too low, though, you may not be able to refinance unless you use a streamline (no-appraisal) refinance program.
You can sell your house right after refinancing — unless you have an owner-occupancy clause in your new mortgage contract. An owner-occupancy clause can require you to live in your house for 6-12 months before you sell it or rent it out.
Does VA require a pest inspection on a cash-out refinance?
VA Loans That May Require a Pest Inspection
All VA loan home purchases or VA cash-out refinance loans are susceptible to pest inspection requirements, depending on what state or county the purchase property is located. VA streamline loans (IRRRLs) do not require a pest inspection in any state.
Lautz believes mortgage rates will stay in the current range of mid-6% to 7% for the first half of 2024. “There's no sizable change expected until the later part of 2024,” says Lautz. Indeed, mortgage rates are a full percentage point lower than the most recent peak in October 2023.
VA loans do not require private mortgage insurance (PMI) or any other type of ongoing mortgage insurance. No PMI is a unique benefit, as most home loan options have some form of monthly mortgage insurance. Avoid paying thousands in mortgage insurance with a VA loan. Start here and check your eligibility for a VA loan.
- Better, 3.89%
- Bank of America, 4.20%
- Citibank, 4.23%
- Amerisave, 4.33%
- DHI Mortgage Company, 4.34%
- PNC Bank, 4.35%
- Home Point Financial, 4.35%
- Navy Federal Credit Union*, 4.38%
VA loan rates are based on market conditions, your credit scores, the amount you're borrowing and your repayment term. Borrowers with strong credit, a sizable down payment and low levels of debt are likely to receive a lender's lowest rates.
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