What is a VA cash-out loan? Well, it is basically a VA loan that allows Veterans the ability not only refinance their current 1st mortgage into a lower interest rate, but also combine other debt into this new loan. This other debt can be a 2nd mortgage or home equity line of credit that the Veterans currently has, auto loans, credit cards, or any other high interest debt that they would like to pay off.
As with all VA loans, the Veterans Administration has set forth their guidelines upon which they will approve or guarantee the new VA loan. Basically, they have some minimum rules and guidelines that have to be met in order to qualify for the new VA loan.
With the VA Cash-Out loan, the Veterans Administration does allow for a 100% Loan to Value cash-out loan. Basically, if your home appraises for $200,000 the VA will allow your new loan to be the full $200,000 (maybe you owe $175,000 on your 1st mortgage & $25,000 on your 2nd mortgage and you want to combine them).This is one of the only, if not the only, 100% cash-out loans available. This is a huge benefit to Veterans.
Remember, the VA loan never has mortgage insurance! If you were to do a cash-out loan on a conventional loan and you needed to go above 80% LTV, you would have mortgage insurance (and they might not approve the loan because qualifying for mortgage insurance has gotten much more difficult recently). FHA loans allow you to go 85% cash-out or 97.75% rate/term (basically if you wanted to pay off a 2nd mortgage that you have had for more than 12 months that would qualify, but no credit cards or other debt)…but you would still pay mortgage insurance.
Now comes the tricky part. Even though the Veterans Administration will allow the 100% cash-out, you have to find a lender that will do it. The VA has their own rules and guidelines that are the minimum set forth, but then every bank or lender that actually funds the VA loan has the ability to add more security or “lender overlays” on their end. For instance, most banks/lenders will only go to 90% LTV on their cash-out loans. They might also impose a higher minimum credit score than the VA might require.
This is where many Veterans get frustrated because they read about the 100% cash-out on the VA website and then are told by the loan officer that they call that they can only go to 90%. With the way the real estate market has hammered the home values, the ability to go to 100% can make or break the deal.
As a Veteran, you want to make sure you shop around and making sure you have a loan officer that can hook you up with a lender that will do the 100% cash-out loan is very important. There are a few lenders that still offer the 100% VA Cash-Out loan but they are few and far between.
As always, when you are deciding on which VA loan officer to use make sure you do your homework and work with someone who understands your needs and can get you the loan you need.
Published At: Isnare.com
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