Introduction
Are you wondering how you can use your home equity to refinance your current mortgage? Well, if you have a VA loan you can apply for a VA cash-out refinance loan by accessing your home equity. However, there are different refinance loan types available in the market. But VA Cash-Out refinance offers you lower interest rates and less fees, therefore saving on the overall cost of your loan.
What is VA Cash-Out Refinance?
Now, let’s read on to find what VA cash-out refinance is all about
The Veterans Affairs (VA) Loan Guaranty is a program exclusive to veterans and active military serving during wartime. The loan guaranty program provides an opportunity to refinance the current mortgage at a favorable rate with no money out of pocket payment. Lenders in Texas helps you to get a VA Cash-out loan for up to 100% of the appraised value of your house irrespective of the current mortgage amount.
Is VA Cash-Out Refinance a good idea?
Do you know your current home appraisal value? If yes, then use your home equity to convert it to cash under VA cash-out refinance. The VA cash-out loan replaces your existing VA loan with a new one that is more than your existing loan amount. The difference amount is receive as cash at the time of closing the loan. The amount received as cash is tax-free under Section 103 of the Internal Revenue Code. In a VA cash-out refinance you get a refinance up to 100% of your loan-to-value ratio. However, some lenders permit you to borrow a maximum of 90% of your home’s appraisal value.
The excess money can be used to pay off many common expenses or clear off existing debt. If you have been thinking about home improvements, repairs, or even buying a new car, this is the best time ever! Overall, VA cash-out serves as a good source of an emergency fund and provides an option to take care of critical financial emergencies without having to sell your house.
VA cash-out refinance also allows you to refinance your current FHA or conventional mortgage into a VA loan and get better loan terms. This includes lower interest rates, zero down payments, no mortgage insurance premiums, and a lower monthly installment. Thus, it is a good idea especially if you have a high-interest rate on your mortgage and wish to reduce it further.
Another type of VA refinance is the VA Interest Rate Reduction Refinance Loan or VA streamline refinance. Here the lending process is simplified by saving time and money. But with a VA streamline refinance you cannot get more than what you currently owe on your mortgage. You also cannot refinance if the current loan is not being serviced by the Department of Veterans Affairs.
Do I qualify for VA Cash-Out Refinance?
The VA cash-out refinance is available to everyone who has an existing VA loan in Texas and requires refinancing immediately. You can get a VA home loan in Texas if you fulfill one or more of the following requirements
- Served as an active veteran member for consecutive 90 days during wartime and 181 days during peacetime.
- Served as National Guard or Reserves for six years
- Spouse of a service member who has died in the line of duty.
- Honorably discharged from active service due to disability.
If you meet the above requirements you can get a certificate of eligibility from the department of veteran affairs. You need to show this certificate to the Texas Mortgage loans to qualify for the VA loan benefits.
However, there are certain other eligibility criteria that need to be met before you apply for a VA cash-out refinance loan.
- A FICO score of 620 or more. Some lenders accept a credit score of as low as 580.
- Debt-to-Income not more than 41%. However, if you have a stable income and enough residual income a higher DTI ratio of up to 50% is allowed.
- VA loan active for at least one year and no older than 10 years.
- Loan amount not exceeding the VA’s county loan limit.
- The current appraisal value of your house must be at least as much as the original appraised value.
- You need to be the current owner of the property you are refinancing and you must be using it as your primary residence
If you meet the above-mentioned criteria then rest assured. The VA cash-out refinance is your ticket to a better and more comfortable financial life.
How to apply for VA Cash-Out Refinance?
You can simply contact your local bank, Mortgage Company, or credit union that offers home loans in Texas or VA mortgage loans and ask about their refinancing. The approval process needs a VA certificate of eligibility and an appraisal of your home by an FHA-certified appraiser that is paid for by the lender. Once the appraisal value is determined, the VA cash-out refinance loan is processed and you receive a check from the lender.
Are there any charges involved?
There are various charges that you may need to pay while refinancing with a VA cash-out loan. These charges include loan origination fees, title insurance, VA cash-refinancing fee, etc. There are no application fees or closing costs for refinancing your current VA loan into a new one. However, for home improvement loans, you will be charged an appraisal fee of $300 or more, depending on your location. VA refinancing fee is waived for a disabled veteran applying for a VH and also for a surviving spouse of a veteran who died while in service.
Bottom Line:
Whether you are refinancing your current VA loan into a new one or want to get cash out of your home equity, the best option to go with is VA cash-out refinance. A VA cash-out refinancing helps to improve your overall financial well-being. It also extends the amount of time to repay your loan.
