VA Cash-Out Refinance Loans: How They Work | Pennymac (2024)

FAQs

How hard is it to get a VA cash-out refinance? ›

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 will guaranty loans up to 100 percent of the value of your home. The Department of Veterans Affairs (VA) Cash-Out Refinance Loan is for homeowners who want to trade equity for cash from their home.

Yes. Most lenders require you to have a credit score of at least 580 to qualify for a refinance and 620 to take cash out. If your score is low, you may want to focus on improving it before you apply or explore ways to refinance with bad credit.

The credit benchmark for a VA Cash-Out refinance is often a 620 minimum. Additional requirements can include: Meeting the VA's service requirements for VA loan eligibility. Certifying that you intend to occupy the property as your primary residence.

VA Cash-Out Refinance Appraisal

The VA requires a credit check and an appraisal on all Cash-Out refinance loans. These loans require the same underwriting process that's applied to VA purchase loans.

“I would recommend utilizing your VA cash-out refinance option if you have home improvements that you want to do, have excessive debt to pay off or are interested in purchasing investment properties,” says Bower. Still, the right answer will depend on your situation.

A Type 1 cash-out refinance occurs when the loan amount of the new loan is less than or equal to 100 percent of the payoff amount of the loan being refinanced. A Type 2 cash-out refinance occurs when the loan amount of the new loan is greater than 100 percent of the payoff amount of the loan being refinanced.

VA IRRRL eligibility requirements

At least 210 days must have passed since you took out your current VA mortgage. Lenders must check the Credit Alert Interactive Verification Reporting System (CAIVRS) database to confirm you don't have any defaulted federal debt, including: Federal student loans.

Cash-out refinance cons

You owe more: Because you're taking out a larger loan amount, your overall debt load increases. No matter how close you were to paying off your original mortgage, the cash-out raises your debt level.

Can you get denied for a cash-out refinance? ›

You can potentially get denied for a no cash-out refinance or a cash-out refinance depending on the terms of the loan and your financial situation. For example, you typically must have at least 20% in equity in your home to get a cash-out refinance and if you don't your refinance could be denied.

Cash-out refinances have a three-day rescission period allowing you an opportunity to change your mind about the new loan. That's why you won't get your cash at the closing table. If you move forward with the loan, you'll receive your funds on the fourth day – the disbursem*nt date.

Most homeowners use some of their cash-back to pay closing costs so they don't have to pay out of pocket. How long does a VA cash-out refinance take? VA cash-out refinancing usually takes about as long as a standard mortgage: 40 to 55 days on average.

Unfortunately, you likely can't get a VA cash-out refinance if you own the home free and clear. Instead, the VA requires that this loan refinance an existing lien against the property. The good news is that there are few requirements for the type of loan you must currently have.

Cash-out refinance gives you a lump sum when you close your refinance loan. The loan proceeds are first used to pay off your existing mortgage(s), including closing costs and any prepaid items (for example real estate taxes or homeowners insurance); any remaining funds are paid to you.

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.

Regular refinancing loan (cash-out) • 100 percent of the VA reasonable value, plus • the cost of any energy efficiency improvements up to $6,000, plus • VA funding fee.