The VA cash out refinance program offers a unique opportunity to tap into the equity of your home, providing a financial cushion and the flexibility to pay off high-interest debts, make home improvements, or pay for education and other expenses. However, the process of obtaining a VA cash out refinance can be confusing and there are many questions that homeowners may have. In this article, we will provide a comprehensive guide on the VA cash out refinance, addressing some of the most frequently asked questions and providing valuable insights to help veterans and military families make informed decisions.
The VA loan has two primary mortgage options when it comes to refinancing. There is the VA IRRRL program and the VA cash out refinance loan.
When it comes to taking advantage of the benefits offered by the Department of Veterans Affairs (VA) home loan program, the VA cash out refinance is one of the most popular options among veterans and military families. This type of refinance allows homeowners to tap into their home’s equity to get cash back at closing, which can be used for a variety of purposes, such as paying off high-interest credit card debt, making home improvements, or consolidating other debts.
However, there are certain guidelines and requirements that must be met in order to qualify for a VA cash out refinance. In this article, we will take a closer look at the process and what you need to know in order to successfully refinance your VA loan.
VA Cash-Out Eligibility Requirements
The first step in the VA cash out refinance process is to determine your eligibility. In order to qualify, you must:
- Have Equity in your home
- Have a satisfactory credit history
- Have enough income to support the new loan
- Live in the property as your primary residence
Additionally, the home must be in a good state of repair and meet certain minimum property requirements, as established by the VA. The VA cash-out loan essentially replaces your existing VA loan with a brand new one, and allows you to draw cash out of the loan at closing. Not only can you get money for home improvements, it could potentially lower the interest rate on your current loan. You can even refinance a conventional mortgage into a VA cash out loan. It sounds good, right? Of course, but there are always questions you should ask yourself before making a decision to refinance your current mortgage.
Appraisal and Underwriting
Once you have determined that you meet the eligibility requirements, the next step is to have your home appraised. The VA requires that the property be appraised by a VA-approved appraiser in order to determine its current market value. This appraisal will be used to determine the maximum loan amount that you can receive.
After the appraisal, the lender will begin the underwriting process. This is where the lender will review your credit, income, and assets to determine your ability to repay the loan. The lender will also ensure that the property meets the VA’s minimum property requirements.
VA Funding Fee
One of the unique features of the VA loan program is the VA funding fee. This fee is a percentage of the loan amount that is paid to the VA to help cover the costs of the program. The VA funding fee is typically financed into the loan, which means that the homeowner does not have to pay it out of pocket at closing.
The VA funding fee varies depending on several factors, including:
- Whether you are an active duty military member or a veteran
- Whether you have used your VA loan entitlement before
- Whether you make a down payment of at least 5%
Interest Rates and Mortgage Rates
The VA cash out refinance loan has a competitive interest rate and mortgage rate, which makes it a great option for many veterans and military families. Additionally, the VA does not have a maximum loan amount, which means that you can borrow as much as you need, up to the value of your home.
VA Cash Out Refinance FAQ:
Frequently asked questions about VA cash out refinance home loan.
There are several fees associated with a VA cash out refinance, including:
- Appraisal fee: This is a fee charged by the VA-approved appraiser to determine the value of your home.
- Underwriting fee: This is a fee charged by the lender to cover the cost of reviewing your credit, income, and assets.
- Closing costs: These are costs associated with closing the loan, such as title fees, recording fees, and attorney fees.
- VA funding fee: This is a fee paid to the VA to help cover the costs of the program. The VA funding fee varies depending on several factors, including whether you are an active duty military member or a veteran, whether you have used your VA loan entitlement before, and whether you make a down payment of at least 5%.
A VA cash out refinance can be a great way for veterans and military families to tap into their home’s equity and get cash back at closing. However, it’s important to understand the guidelines and requirements that must be met in order to qualify. By working with a VA-approved lender, you can ensure that the process goes smoothly and that you get the best possible terms for your loan.
If you would like more information on applying for either a VA cash out refinance or a VA IRRRL, call us now at 855-956-4040 to speak with a VA lender, our VA mortgage specialist are ready and available for any VA refinance loan question that you might have.