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If you are currently with your VA mortgage loan, have military ties, have strong home equity and a healthy financial situation, you may be able to qualify for a VA-backed cash-out refinance loan. VA cash-out refinancing allows you to refinance your existing mortgage loan under new terms, while also borrowing cash directly from your home equity. You may even be able to qualify for a VA cash-out refinance loan if your current mortgage isn’t a VA loan.
Am I Eligible for VA Cash-Out Refinancing?
VA home loans are backed by the United States Department of Veterans Affairs (VA). They are available to active-duty service members, military veterans and surviving spouses who meet specific eligibility standards:
• You qualify for a VA home loan Certificate of Eligibility (COE), and
• You qualify for a VA home loan through a VA-approved lender, and
• You live in the home you are refinancing with the new loan.
In general, VA loans offer several key advantages you won’t find with other mortgage loan types like conventional or FHA. They provide very competitive mortgage rates and up to 100% financing (no down payment required). If you have a military background and are looking to buy a home, talk with your mortgage lender about VA loan options. Make sure they are VA-approved, as not all lenders qualify.
What is VA Cash-Out Refinancing?
Cash-out refinancing is also available with VA backing. You can refinance your existing VA loan at a new low interest rate. You can also tap directly into your home equity by borrowing cash. The amount of cash you borrow will be added to your previous loan principal balance. That new total will be the principal amount for your refinanced loan, with one convenient monthly payment and the lowest mortgage rate for which you can qualify.
To qualify, your mortgage lender and the VA will review your personal finances and confirm your Certificate of Eligibility. Your current income, credit rating (FICO score), other debts and other factors will be taken into account to determine your loan eligibility and set your qualified mortgage rate for the refinanced loan. A minimum credit score of 680 is generally required for VA cash-out refinancing, though there may be some flexibility based on your other qualifying factors. Your lender will also order a third-party home appraisal to determine the fair current market value of your property. Your home equity is calculated by subtracting the remaining principal amount of your original loan from the appraised home price.
How Much Cash Can I Take Out with a VA Loan?
Most cash-out refinance loans allow you to borrow up to 80% of your home’s current appraised value. VA-backed refinance loans are guaranteed for up to 100% of the value of your home. This means you can refinance your existing loan principal and borrow the full amount of your current home equity. You may not want to cash out that much if you don’t need it, but VA cash-out refinancing definitely gives you more borrowing potential.
Let’s say you currently owe $250,000 on your original VA home loan. Your property appraises for $350,000. That means you have up to $100,000 of home equity you can cash out with a VA cash-out refinance loan. Your new loan principal (after the refinance) would be $350,000 if you choose to take out all of the equity and qualify for 100% financing. That cash can be used for other important expenses, such as paying off high-interest debts, educational expenses, medical bills or making equity-building home improvements to your house.
How Do I Apply for a VA Cash-Out Refinance Loan?
The first step is to obtain your COE from the Department of Veterans Affairs. If you work with an experienced VA-approved mortgage lender, they should be able to help you with this step during the application phase. Again, you will want to work with a licensed VA-approved lender who can offer VA loan products and expert guidance. They will work in conjunction with the regional VA office to confirm your eligibility and get the loan funding approved.
In addition to your COE, you will generally need to provide copies of recent paycheck stubs, as well as W-2 forms and tax returns from the previous two tax years. A credit check will be required, along with a home appraisal and other standard loan underwriting steps. If you qualify, your lender can help you lock in the best possible mortgage rate for the VA refinance loan. Once approved, funding can be provided quickly and the equity cash can be wired directly to your bank account.
To learn more about VA cash-out refinancing in the Atlanta area, contact Moreira Team | MortgageRight today. We are an experienced VA-approved mortgage lender and will be happy to answer any questions you have as our team guides you through the refinancing and cash-out processes.