VA Cash Out Refinance Loan
The VA cash-out refinance loan has exceptional benefits for veterans and their surviving spouses. The veterans current home loan does not have to be a VA loan in order to refinance to a VA cash out program. This mortgage program allows veteran homeowners to borrow up to 100% of their homes value. This means the homeowner can get the difference between what they owe on their existing mortgage and the home’s actual value in the form of cash.
VA loans offer really low interest rates and there is no monthly mortgage insurance which can be a big benefit to the borrower’s cash flow when compared to FHA cash out options. However, the VA loan does require an upfront funding fee of 2.3% which gets financed into the new mortgage. That’s $2,300 for every $100,000 borrowed which can add up quickly depending on your loan amount. It’s important to evaluate this funding fee when comparing your loan options for pulling cash out.
VA Cash OUT Refinance Guidelines
To qualify for a VA Cash out Refinance, a homeowner will need to be a veteran, or a surviving spouse, and meet VA guidelines as well as any additional lender guidelines. Keep in mind that the VA only insures the loan against default and does not lend money directly. This is why you will often find conflicting information regarding VA guidelines when seeking a lender’s approval.
The lender will actually determine their own guidelines for approving VA loans and these guidelines are called lender overlays. The main overlay to be concerned about beyond credit score would be a Loan to Value (LTV) overlay as some lenders will restrict cash out loans to 90% of the home’s value.
Michigan Mortgage Solutions Can Still Provide 100% VA Home Loans
However, Michigan Mortgage Solutions is a mortgage broker and a lender. This means we can lend our own money but also broker loans through our lender partners. We have dozens of lender partners and a handful of them still allow 100% financing on VA cash out refinance loans.
Top Requirements For The VA Cash Out Refinance Program
Credit Score Requirements – VA guidelines state that you need a minimum credit score of 580 to qualify for a cash-out refinance, but most lenders set their own minimum credit scores. Most lenders require at least a 620 score but at Michigan Mortgage Solutions we have lenders that will provide approvals all the way down to 580.
Debt to Income Requirements – To get approved for a VA Cash-Out Refinance, a borrower must have a debt to income ratio lower than 41%. This means that all debt payments including the new VA Cash Out loan cannot be more than 41% of their total gross income.
Payment History Requirements – To qualify for an VA Cash-Out Refinance the borrower must have no more than one 30 day late mortgage payment in the past twelve months and none in the past six months.