The VA mortgage program is an excellent option for California’s Veterans when it comes to refinancing home to pull cash out. Similar to how VA allows for 100% financing on a home purchase, VA also allows 100% financing on cash out refinances.
There are two main types of refinance programs available using VA financing. The VA IRRRL or Interest Rate Reduction Refinance Loan, which is also known as a VA Streamline Refinance, is an extremely simplified process that doesn’t require a new appraisal and only needs a minimal amount of documentation. With a streamline refinance, a veteran has the ability to lower their interest rate and/or take time off of their loan term. The VA IRRRL is strictly a “VA to VA” refinance, meaning you must already have a VA loan to take advantage of the IRRRL program. Also, a VA IRRRL DOES NOT ALLOW CASH OUT. And this is where the other VA refinancing program comes into play. A VA cash out refinance is a much more thorough process but allows cash out up to 100% of the property value.
9 Things to Know about a VA Cashout Refinance
- The current loan being refinanced does not need to be a VA loan. Yes, you can refinance an FHA or Conventional loan into a VA loan. Many Veterans refinance their CalVet loans into a VA loan since CalVet does not offer refinancing.
- VA allows for cashout refinancing up to 100% of the property value. No other program even comes close.
- The VA program is not a one time benefit. It can be used multiple times.
- VA allows a cashout refinance to payoff a Chapter 13 bankruptcy. This is just an example of how flexible the qualifying is.
- Unlike the IRRRL program, a VA cashout refinance is a fully qualifying loan. Full income and asset documentation, appraisal, and clear termite report are required.
- It only takes 30 days to close.
- VA interest rates tend to be very competitive with other loan programs, despite the fact that VA will allow 100% financing.
- There is no PMI, or monthly Mortgage Insurance (like you would have on other loan program that allow financing above 80% loan to value.
- There is a VA Funding Fee, except for those Veterans with a disability rating. (VA waives the Funding Fee for Veterans who have a Disability Rating)
In order to get a VA cash out refinance, California Veterans will need to provide the lender their income and employment documentation. The lender will also need to order a new appraisal of the property to verify the property value and establish the maximum loan amount.
While VA cash out refinances are able to be completed up to 100% value of the property, not all lenders follow will do everything VA allows. With many VA cash out refinances, some lenders will limit the maximum cash out amount to 90% of the property value. If you run into a situation where the lender is limiting your cashout to less than 100% of the property value (and you want the higher loan amount), find another California VA lender who can get you the loan amount you want.
When checking into your options for refinancing, it is important to research and give consideration to all available possibilities. A VA refinance is a great option for California Veterans, but the VA Funding Fee can be steep (unless you get the waiver). If you only need cash out to 80% of the property value, then a Conventional loan may be a better option. Have your favorite California VA Loan Specialist prepare a Side by Side comparison of the programs so that you can see your options.
Authored by Tim Storm, a California VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.CaliforniaVALoanExpert.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.