VA Cash-Out Refinance Loan

What you get

A new VA-backed loan that replaces your current loan, VA or not. You can take cash out of your home equity or move a non-VA loan into a VA-backed one.

What VA and your lender look for

1. 1A COEYou show your lender a COE, which VA issues when your service meets its rules.
2. 2Credit and income that meet VA and lender standardsYou meet VA’s standards and your lender’s for credit, income, and anything else the lender requires. VA sets no minimum credit score, but some lenders do.
3. 3A loan no bigger than the home’s valueThe new loan cannot be more than 100% of the value VA sets for the home. The funding fee can be added to the loan, but any part that would push it past that value is paid in cash at closing.
4. 4A new loan in your financial interestThe new loan does at least one of these: ends monthly mortgage insurance, shortens the term, lowers the rate, lowers the payment, raises your monthly money left over, pays off a short-term loan to build, alter, or repair the home, moves an adjustable rate to a fixed rate, or keeps the loan at 90% or less of the home’s value.

Source: VA.gov: cash-out refinance loan (opens in new tab); VA.gov: VA home loan service requirements (opens in new tab); 38 CFR 36.4340 (opens in new tab); VA.gov: VA home loan limits (opens in new tab); 38 CFR 36.4306(a) (opens in new tab)

Which refinance is this?

• Take cash out, or replace a non-VA loan

  A cash-out refinance replaces your current loan with a new VA-backed loan. You can take cash from your home equity to pay off debt, pay for school, make home improvements, or meet other needs. You can also use it to move a non-VA loan into a VA-backed loan. You will live in the home you refinance, and you get the loan from a private lender, not from VA.

  Source: VA.gov: cash-out refinance loan (opens in new tab); VA.gov: VA home loan types (opens in new tab); 38 CFR 36.4306(a) (opens in new tab)

• When the loan you are replacing is VA-backed

  Refinancing a VA-backed loan this way adds rules about timing and cost. If you only want a lower rate on a VA loan, the IRRRL may fit better.

  1. 1Payment history, timing, and cost paybackVA can back the new loan only after the later of 210 days from your first payment on the current loan or your sixth monthly payment. If the new loan is no more than the payoff, the lender must show the costs are paid back through lower monthly payments within 36 months, and the new rate must be at least half a percentage point lower when both loans have fixed rates, or 2 percentage points lower when a fixed rate loan moves to an adjustable rate.

  Source: 38 CFR 36.4306(b) (opens in new tab); 38 CFR 36.4306(c) (opens in new tab); VA.gov: interest rate reduction refinance loan (opens in new tab)

What to gather, and what it shows VA

These papers go to your lender, and the COE request goes to VA. BeneVets does not ask for copies of them.

Steps, in order

1. Request your COE

   Request it online on VA.gov, ask your lender to request it, or mail VA Form 26-1880 to your regional loan center.

   Source: VA.gov: cash-out refinance loan (opens in new tab); VA.gov: how to request a VA home loan COE (opens in new tab); VA Form 26-1880 (opens in new tab)

2. Compare several lenders

   Go to a private bank, mortgage company, or credit union. Terms and fees vary, so contact several. Be careful with offers that say you can skip payments or get a very low rate.

   Source: VA.gov: cash-out refinance loan (opens in new tab)

3. Give the lender what it asks for

   Give the lender your COE, recent pay stubs, W-2 forms, tax returns if asked, and anything else it requires.

   Source: VA.gov: cash-out refinance loan (opens in new tab)

4. Get the appraisal

   The lender orders an appraisal of your home. The new loan cannot be more than the value VA sets.

   Source: VA.gov: cash-out refinance loan (opens in new tab); 38 CFR 36.4306(a) (opens in new tab)

5. Read the loan comparison

   Check the comparison and the home equity estimate the lender gives you, at application and again at closing. Make sure you understand how the new loan amount relates to the value of your home.

   Source: 38 CFR 36.4306(a) (opens in new tab); VA.gov: cash-out refinance loan (opens in new tab)

6. Close and pay the costs

   Follow the lender’s closing process and pay your closing costs. Closing costs can add up to thousands of dollars. Pay the funding fee at closing unless an exemption applies, such as receiving VA compensation.

   Source: VA.gov: cash-out refinance loan (opens in new tab); VA.gov: VA funding fee and closing costs (opens in new tab); 38 CFR 36.4313(e)(5) (opens in new tab)

7. Get free help

   Free help: an accredited VSO can file this with you. Find one near you in the BeneVets VSO directory at Find an accredited VSO near you. A VSO can help with a COE request; the refinance itself runs through your lender. VA home loan representatives answer questions at 877-827-3702 (TTY: 711).

   Source: VA.gov: accredited representatives (opens in new tab); 38 CFR 14.627(h) (opens in new tab); VA.gov: how to request a VA home loan COE (opens in new tab)

Good to know