VA Cash Out Loans

VA considers all non-Interest Rate Reduction Refinancing Loan (IRRRL) refinances as cash-out refinances, regardless of whether or not the borrower receives cash at closing.

VA cash-out refinance transactions must pay off a lien secured by the subject property (e.g., mortgages, tax liens, judgment liens, etc.).

Note: The refinance of a free and clear property is not allowed.

Cash-Out Refinances on or before 2/14/19

For loans with an application date on or before February 14, 2019. The maximum loan amount is 100 percent of the appraised value plus the VA funding fee.

Cash-Out Refinances on or after 2/15/19

For loans with an application date on or after February 15, 2019, VA has categorized cash-out refinance loans as the following with the published rules per Circulars 26-18-30, 26-18-30 Change 1,  Circular 26-19-05 and 26-19-05 Change 1 :

All Type I and Type II cash-out refinance loan applications must meet the following requirements to be eligible for guaranty by VA:

Note: The disclosures (initial/final) must be signed/acknowledged by the Veteran/Borrower.

Net Tangible Benefit Test Requirements

A net tangible benefit (NTB) test for Type I and Type II must be provided to the veteran borrower, as follows:

Interest Rate Reduction – Type I

If refinancing an existing VA guaranteed loan that has a fixed rate and using the interest rate reduction NTB option for a Type I cash-out, must meet one of the following:

Fee Recoupment

This requirement applies to Type I cash-out loans that are existing VA guaranteed.

Fee Recoupment Calculation

Note: If the loan being refinanced has been modified, the principal and interest reduction must be computed/compared to the modified principal and interest monthly payment.

Loan Seasoning Requirements

All VA-guaranteed loans must be seasoned for a period of time, before refinancing to a new VA-guaranteed loan. The required seasoning is the later of:

Note: The date on which the 1st payment is made must be verified. Advance/prepaid payments to meet the 6 scheduled payment requirement is not permitted.

Loans seasoned less than or equal to 12 months from the date of closing, obtain a payment history/ledger from the servicing lender and/or credit bureau supplement documenting all payments were made within that timeframe.

Note: Ginnie Mae Seasoning Requirements must be met for all cash-out loans.