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You may be wondering what a VA cash-out loan could be and how it would benefit you. It allows veterans the wherewithal to refinance the current home loan to a much friendlier interest rate and allows the combination of other debt with the new loan. The other debt could be a second mortgage or a home equity credit line. But, it could also cover any high-interest debt, such as credit cards, as well as a car loan.
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Veterans Administration Qualifications
All VA loans have guidelines that must be met before a new loan garners their guarantee. These rules are rather minimal. The VA will allow for a 100% loan to value cash-out loan. In a hypothetical situation: If a home is appraised at $200,000, the VA allows the new loan for the full amount - perhaps $175,000 is paid up on an initial mortgage, perhaps you have $25,000 on a second, and you are seeking to roll them together. This is the only 100% cash-back loans on the market and it can be huge windfall for veterans.
Mortgage Insurance
A VA loan does not require mortgage insurance.
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A conventional loan with a cash-out would require mortgage insurance if you should go above 80% LTV. And, approval for that insurance has gotten harder to get a hold of recently. Now, FHA home loans allow 85% cash-out on a 97.75 rate over term. So, if you desired to pay off a 2nd mortgage, you would have over a year to qualify, but no other debt such as credit card bills would be allowed, and you would still be obligated to pay home loan insurance.
Finding the Lender
Though it may be iffy, it is not impossible to find a lender. The VA will grant 100% cash-out with a willing lender. Of course, the VA has plenty of rules and guides set up for minimums, but lender that actually puts up the cash for the loan could add lender overlays or securities on their side of the deal. You see, most lenders will only go for 90% LTV on cash-out loans. They could also ask to see a higher credit scoring than the VA would impose.
90%-100% Frustrations
Some veterans become a little vexed when they read or hear about 100% cash-out loans only to discover from a loan specialist the 90% is the top allowed. It can be a deal breaker, with the way the housing market has been pounded by fluctuating home appraisals, if the lender will not accept 100%. Shopping 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.
Go Shopping for Your VA 100% Cash-Out Loan
It would behoove a veteran to shop around and gain the arm and ear of a qualified loan specialist that has a line to a lender willing to do 100% cash-out mortgage. Some still offer the deal, but they can be hard to find. Do your home work and make sure your loan officer understands your needs and how to get you the loan you want.