VA Cash Out Refinance Guidelines and Credit Requirements

What is a VA Cash Out Refinance?

The VA Cash out Refinance Program offered exclusively by Lendia is a powerful program that allows eligible veterans to refinance their home and obtain cash out to 100% of the value of the home.

The following scenarios outlined below define what is considered to be a VA Cash Out Refinance transaction:

• Homeowner currently has a VA loan and wishes to refinance and get cash out for whatever reason they want
• Homeowner currently has a (conventional loan, FHA loan or other loan type), is VA Eligible,  and wants to refinance into a No mortgage insurance VA Loan
  • Borrower can get additional cash out during this type of VA refinance
  • Borrower can just convert his exiting loan into a VA loan with no cash proceeds at closing to take advantage of the lower VA rates and added advantage of no mortgage insurance
• Homeowner must have an existing lien. Property can not be owned free and clear.

To avoid out-of-pocket costs in any of the scenarios discussed above, homeowners can choose to roll the closing costs and fees into the balance of the loan and still manage to save on their monthly payments.

What are Lendia’s Requirements for a VA Cash Out Refinance?

Lendia’s VA Cash Out Program allows Cash Out to 100% of the Value of the property!

Lendia’s VA Cash Out Refinance (Loan Amount, Credit Score and Loan to Value (LTV)) Requirements:

• For Loan Amounts ≤ $484,350, Lendia’s Minimum FICO Score is 600 and the maximum cash out allowed is to 100% of the property’s value
• For Loan Amounts > $484,350, Lendia’s Minimum FICO Score is 620 and the maximum cash out allowed is to 100% of the property’s value

Lendia’s VA Cash Out Refinance VA Funding Fee Requirements:

• Regular Military First Time Use 2.15%
• Regular Military Subsequent Use 3.30%
• Reservist/National Guard First Time Use 2.40%
• Reservist/National Guard Subsequent Use 3.30%

Lendia’s VA Cash Out Refinance Exemptions from Funding Fee Requirements:

The following individuals are exempt from the Funding Fee:

1. Veterans that are receiving compensation for service connected VA disability;
2. Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay;
3. Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan);
4. Veterans still on active awaiting discharge and who were rated eligible to receive compensation as a result of a pre-discharge disability examination and rating will be considered as receiving compensation as of that date; and
5. Veterans entitled to receive VA compensation for service-connected disabilities, but who are not presently in receipt because they are on active duty.

Lendia’s VA Cash Out Refinance Occupancy Requirements:

The borrower(s) have to occupy the property as their primary residence to be eligible for a VA Cash Out Refinance with Lendia

Lendia’s VA Cash Out Refinance Appraisal Requirements:

Lendia will order appraisals directly via VA’s “The Appraisal System” also known as TAS. Lendia will accept transferred appraisals as long as they were ordered through TAS and must comply with the standards and practices established by the Uniform Standards of Professional Appraisals Practice (USPAP).

Lendia’s VA Cash Out Refinance Income and Liability Requirements:

To qualify for a Lendia VA Cash Out refinance the borrower(s) income and liabilities have to be examined and analyzed. The typical debt to income ratio (DTI) on a transaction for a VA Loan is 41%, for anything above that the borrower has to meet the VA residual income requirements discussed below. At Lendia we have experienced cases where this ratio was as high as 60%, but since the borrower met the VA residual income requirements and had other compensating factors to allow for such a high ratio the loan was approved. So we will not stress this point as there is not a magic number or threshold and it all depends on what the AUS findings are and the particular situation is.

Lendia accepts the following types of income sources:

• Salaried Borrower / Wage earner
• Self Employed Borrower
• Military / Active Duty
• Part time / second job and Seasonal Employment income
• Rental Income
• Alimony / Child support
• Unemployment benefits income
• Social Security income
• Retirement, Government, Annuity and Pension income
• Disability income
• Foster Care income
• Interest and Dividends income
• Capital Gains income
• Notes receivable income
• Tip income
• Trust income

Lendia’s VA Cash Out Refinance Property Requirements

• For veterans who already have a VA Loan and are looking to refinance and get Cash out it is important to note that the property has to meet VA Minimum Property Requirements (MPRs). The MPRs provide a basis for determining that the property is
  • Safe, structurally sound and sanitary, and
  • Meets the standards considered acceptable in a permanent home in its location

** It is important to note that Termite Inspection and clearance is a requirement on any property type for closing a Lendia VA Cash Out Refinance loan.

• For eligible veterans , servicemen & service women who do not currently have a VA Loan and wish to refinance into a VA loan the following is a list of eligible and ineligible property types that Lendia can fund on.
  • Single Family Dwellings, including townhomes and row homes
  • 2-4 Family Dwellings
  • Condominiums and Site Condominiums – For Condos the project has to be approved
  • Planned Unit Developments (PUD)
  • Doublewide Manufactured Housing – acceptable only if it has characteristics of site built housing and is legally classified as real property and confirms to all local building codes in the jurisdiction in which they are permanently located.
  • New Construction – need 1 year builder warranty and 10 year protection plan
  • Properties on leased land (need lease approved)

NOTE: Properties can not be vested in the name of irrevocable trust

Ineligible properties or collateral:

• Mobile Homes
• Mixed Use properties
• Multi family properties with more than 4 units
• Manufactured condos
• Bed and Breakfast properties
• Agricultural-type properties (such as farms, orchards or ranches) where income is being produced from the property

Lendia’s VA Cash Out Refinance Residual Income Requirements:

Residual income is the amount of net income remaining (after deduction of debts and obligations and monthly shelter expenses) to cover family living expenses such as food, health care, clothing, and gasoline. The numbers are based on data supplied in the Consumer Expenditures Survey (CES) published by the Department of Labor’s Bureau of Labor Statistics. They vary according to loan size, family size, and region of the country Count all members of the household (without regard to the nature of the relationship) when determining “family size,” including:

• An applicant’s spouse who is not joining in title or on the note, and
• Any other individuals who depend on the applicant for support. For example, children from a spouse’s prior marriage who are not t he applicant’s legal dependents.

Any individual from “family size” who is fully supported from a source of verified income which, for whatever reason, is not included in effective income in the loan analysis can be omitted. For example:

• A spouse not obligated on the note who has stable and reliable income sufficient to support his or her living expenses, or
• A child for whom sufficient foster care payments or child support is received regularly.

The residual income figure (from the following tables) is reduced by a minimum of five percent if:

• The applicant or spouse is an active-duty or retired serviceperson, and
• There is a clear indication that he or she will continue to receive the benefits resulting from use of military-based facilities located near the property.

Residual Incomes by Geographic Region for loan Amounts $79,999 and below

Residual Incomes by Geographic Region  for Loan Amounts of $80,000 and above

Key to Residual Income Geographic Regions

Lendia’s VA Cash Out Refinance Escrow Account / Impound Account Requirements:

Lendia requires an escrow account or impound account to be set up at closing will always be required on VA loans regardless of Loan to Value (LTV).

What documents do I need for a VA Cash Out Refinance?

Personal Information

• Your basic information like name, address, and phone number
• Previous addresses for the past 2 years
• Dates of birth and years of school completed
• Social Security numbers for all loan applicants – required for checking credit
• Copy of valid ID such as a driver’s license or government ID
• Number and age of dependents

Employment and Income

• Name, address, phone number, and dates of employment for all employers over the last 2 years
• 30 days’ worth of paystubs
• Last 2 years’ W2s and federal tax returns (1040’s)
• If self employed: Last 2 years federal tax returns with all schedules (if you have commission or rental income to qualify, you will also need to provide tax returns)
• Copies of social security, pension, and/or retirement award letters and corresponding 1099s (if you receive this type of income)
• Divorce decree and settlement paperwork (if applicable)

Assets

• 2 Months bank statements for checking and savings accounts
• 2 Months statements for retirement accounts
• Real estate currently owned, if any

Note: Assets might be needed if the debt to income ratio is high

Property

• Appraisal showing a value of at least the amount you need to borrower (your Lendia loan officer will order this)
• Name and contact information for the homeowner’s insurance agent or a copy of the insurance declaration page
• Name and phone number for the homeowner’s association, if applicable

Credit/Liabilities

• General knowledge of your current credit card, student loan, auto loan, and other credit accounts. Lendia will pull a credit report that shows your accounts, but on occasion, the information may be outdated, missing, or erroneous.
• Amount paid each month in child care
• Explanation for derogatory credit (if applicable)
• Bankruptcy and discharge paperwork (if applicable)
• Documentation disproving any erroneous items on your credit report

Still have questions? You can find out more by calling Lendia at 949-333-4636. Our licensed VA mortgage professionals will guide you through the process.

Complete a simple contact form, and we’ll get in touch with you today.