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How to Get a VA Cash Out Refinance

By B Wood
Dec 19th, 2013

cash out vaDo you have equity in your home and want to access it? Every month when you make a mortgage payment you are decreasing the principal balance of your home loan and creating equity. This year millions of homes throughout the country increased in value giving homeowners additional equity. The difference between what you owe on your home and its sale value is your total equity, and you can use a VA cash out refinance to access it.

Can Anyone Get a VA Home Loan?

If you are a veteran, or currently serving in the US Military, you may qualify for a VA home loan. Before you can get started obtain your DD-214 or Certificate of Eligibility. With that in hand you can apply for one of the many VA home loans including their Interest Rate Reduction Loan (IRRL), a home purchase loan, or cash out refinance


How Does a VA Cash Out Refinance Work?

The VA does not directly issue home loans. They guarantee home loans. That means that they insure a portion of the mortgage against default. It is a guarantee to the bank so that if something goes wrong the bank can recover more of their money.This enables banks to confidently lend more money to veterans, making VA home loans the only real home loans available with zero down.

You can use the VA cash out refinance to pay off debt, pay for school, remodel your home, and more. When you apply your mortgage lender will take a full application that includes your employment history, income, credit score, and debts. They will also order a full appraisal on the home. The VA will guarantee loans up to 100% LTV. The exact amount the lender is willing to offer you will depend on your income and credit history along with the appraised value of your home.

Once you are approved your mortgage lender will draw up closing documents. You typically sign these at an escrow office or bank. After a three day right of rescission period your new VA home loan will close,and checks will be issued. Your escrow agent will receive the money from your mortgage banker and immediately pay off your existing home mortgage and any debts that are listed to be paid off on your Good Faith Estimate. Any cash that is left over will typically be given to you in a cashier’s check or wire transfer.

After your new VA home loan has closed,you will have one monthly mortgage payment. If you obtained the cash out to consolidate debts this will be a nice change. Instead of writing a variety of checks on a monthly basis, you will now only write one. Each month as you pay down the principal balance on your mortgage, you will start to gain back the equity you used to get cash out.

Is a VA Cash Out Refinance Right for Me?

It is important that you select the right mortgage loan for your family’s financial needs, both now and in the future. An experienced mortgage banker can sit down with you and review your situation and discuss what your long term goals are. It is important for your mortgage loan to help you achieve your financial goals, rather than creating a burden.By selecting the right loan term, correct mortgage program, and interest rate, your mortgage banker can make sure you are on the right track to accomplishing your financial goals.