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Excerpt for the VA Handbook
The maximum loan amount for a VA cash-out refinance loan is 100% of the appraised value.
A VA cash-out refinance loan is a VA-guaranteed loan that refinances any type of lien or liens against the secured property. The liens to be paid off may be:
- Tax or judgment liens, or
- VA, FHA, or conventional mortgages.
- Credit cards, auto loans, second mortgages
Loan proceeds beyond the amount needed to pay off the lien(s) may be taken as cash by the borrower for any purpose acceptable to the lender.
The loan must be secured by a first lien on the property.
The veteran must certify that he or she intends to personally occupy the property as his or her home.
Quick Reference Table for Streamline Refinances (IRRRLs) Versus Cash-Out Refinancing Loans
| Feature | Streamline Refinancing | Cash-out Refinancing |
|---|---|---|
| Cash-out Refinancing | To refinance an existing VA loan at a lower interest rate | To pay off lien(s) of any type – can also provide cash to borrower |
| Interest Rate | Rate must be lower than on existing VA loan (unless existing loan is an ARM) | Any negotiated rate |
| Monthly Payment Amount | Payment must be lower than that on an existing VA loan (unless the ARM is being refinanced, a term is shortened, or energy efficiency improvements are being included) | No requirement |
| Discount Points | Reasonable points can be paid – only two of these points can be included in the loan amount | Reasonable points can be paid – if paid from loan proceeds |
| Maximum Loan | Existing VA loan balance, plus allowable fees and charges, plus up to two discount points, plus the cost of any energy efficiency improvements, plus the VA funding fee | 100 percent of the reasonable value of the property indicated on the NOV, plus the cost of any energy efficiency improvements, plus the VA funding fee |
| Entitlement | Veteran re-uses the entitlement used on the existing VA loan – the refinance does not impact the amount of entitlement the veteran has in use | Must have sufficient available entitlement – if existing VA loan on the same property is being refinanced, entitlement can be restored for the refinance |
| Fees and Charges in the Loan | All allowable fees and charges, including up to two discount points, may be included in the loan | Allowable fees and charges and points may be paid from the loan proceeds |
| Cash to Borrower | Not permitted | Borrower can receive cash for any purposes acceptable to the lender |
| Lien/Owner-ship | Must be secured by first lien – veteran must own property | Must be secured by first lien – veteran must own property |
| Refinance of Other Liens | Cannot refinance other liens – can only refinance the existing VA loan | Can refinance any type of lien(s) |
| Maximum Loan Term | Existing VA loan term plus 10 years, not to exceed 30 years + 32 days | 30 years + 32 days |
| Occupancy | Veteran or spouse of an active duty servicemember must certify to prior occupancy | Veteran or spouse of an active duty servicemember must certify as to intent to occupy |
| Appraisal | None | Appraisal is required |
| Credit Underwriting | Credit report will be required | Full credit information and underwriting are always required |
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