Refinance and get cash back with the VA cash-out loan
A VA cash out loan replaces your existing home loan with a brand new one, and allows you to take cash out at closing.
If you want to update your kitchen, or put a new roof on your new home, or consolidate your debt, a cash-out loan is what you would need.
Not only can you get money back for home improvements, it could potentially lower the interest rate compared to your current loan.
If you are not looking to for a cash out loan and simply want to refinance to lower your payment, a VA streamline is the loan you’ll want to apply for.
How does a VA Cash out loan work?
Essentially, the current mortgage you have is being replaced with a new mortgage — that is more than your existing mortgage.
For example, let’s say you have a current loan with a balance of $300,000 and you need $100,000 to renovate your kitchen.
The cash out loan will replace your existing mortgage of $300,000 with a new loan of $400,000.
When refinancing there are also closing costs, the closing costs can also be rolled into the loan on a refinance.
Based on the example above, the new loan would be $400,000 plus closing costs.
The amount of cash that you can cash out will be based on the appraised value of the property.
VA cash-out loans allow up to a 100% loan to value.
What does this mean?
If your appraisal comes back at $500,000 than your new loan amount cannot exceed $500,000 which is 100% LTV.
What is the loan process?
The process to get a VA cash-out refinance is the same as a VA purchase loan.
- A credit report is required. Coole Home requires a minimum credit score of 620 for a cash-out loan
- You’ll have to provide your income documentation. This includes the last 30 days of paystubs and last 2 years of W2s.
- An appraisal is required to determine the value of the home
- Your debt to income ratio must meet the program requirements
The property has to be your current primary residence to do a VA cash-out.
How long does it take to close on a VA Cash-Out refinance?
Since the cash-out loan requires an appraisal, and in some states a termite report, it can take anywhere from 20 to 30 days to close on a cash-out loan
What documents are needed?
The basic documentation needed for a cash out loan is:
- A VA loan application
- Copy of driver’s license
- Copy of social security card
- Copy of your current mortgage statement
- Current homeowners insurance policy
- Copy of your DD Form 214 for discharged veterans
- Last 30 days of pay stubs
- Last 2 years of W2s
There may be more document requirements depending on your unique situation.
For example, if you have a bankruptcy, your bankruptcy documentation may be needed, or if you have a collection, a letter explaining why you have the collection will be needed.
Who is eligible for a CASH OUT?
You are eligible for a VA cash out refinance if you’ve served:
- 90 days in wartime and are now separated
- 90 days and are still on active duty
- 181 days in peacetime and are now separated
- 2 years if enlisted in the post-Vietnam era
- 6 years in the National Guard or Reserves
- Or, if you are a surviving spouse
What are some advantages of a VA Cash Out loan?
- No private mortgage insurance.
- Competitive interest rates. VA loans have the lowest interest rates on the market.
- Easy credit requirements. Veterans Administration oversees the loan program and their guidelines state that a credit score is not required. However, companies that finance the loan, like a mortgage lender, or a bank require a minimum credit score. This is to help avoid risks with mortgage defaults. We require a minimum credit score of 620 for a cash-out loan.
- VA loan is more forgiving when bouncing back after a bankruptcy, foreclosure or short sale.
- No prepayment penalties. You can pay off your loan at anytime without a penalty.
VA funding fee for a cash out loan
The funding fee on a VA cash out is 2.3% for first time use, and 3.6% for subsequent use.
If you are a disabled veteran receiving VA disability, you are exempt from paying the funding fee.
The funding fee is rolled into the loan. No need to worry about paying for this fee out of pocket.
Curious about what the funding fee is all about?
Closing Costs on a VA cash-out
Yes, there are closing costs associated with a VA refinance. Veterans Administration will not cover these cost for you.
The good news is that the closing costs can be rolled into the loan.
The closing costs will depend on your loan amount and the county you live in.
You can learn more about what closing costs are by going to:
Property Taxes and Insurance
VA loans will require your homeowners insurance and property taxes to be included in the monthly payment. At closing a few months of property taxes and insurance will be collected for the new escrow/impound account.
If you have funds in your current escrow/impound account, these will be refunded to you after closing on the new loan. The refund will come from the lender that is holding the funds.
Are you ready to apply? Start the process by completing the form below.