VA Cash-Out Eligibility Guidelines: How to Qualify in 2024
VA Cash-Out Eligibility Guidelines: Your Complete Guide for 2024
When it comes to refinancing your home, the VA cash-out refinance is one of the best options out there for veterans and active-duty service members.
The VA cash-out refinance program in 2024 enables homeowners to access their home equity through a 100% cash-out refinance, offering competitive interest rates and no private mortgage insurance (PMI). But before you jump into applying, it’s important to understand the VA cash-out eligibility guidelines.
In this guide, we’ll break down everything you need to know about qualifying for a VA cash-out refinance loan, the benefits, and the changes for 2024 that could impact your decision to refinance.
What is a VA Cash-Out Refinance?
A VA cash-out refinance allows homeowners with a VA loan to refinance their mortgage and take out cash based on their home’s equity. This means you can get a new loan that replaces your existing mortgage and pulls out cash at the same time. It’s an ideal option for veterans and service members who want to:
- Pay off debt
- Renovate or upgrade their home
- Consolidate loans
- Or even cover large expenses like medical bills or education costs.
What makes VA cash-out refinance loans stand out is the potential to cash out up to 100% of your home’s value — something other types of loans don’t offer.
But like any mortgage program, you must meet eligibility guidelines to qualify for this powerful tool.
2024 VA Cash-Out Eligibility Guidelines: What’s New?
The VA cash-out eligibility guidelines have evolved over the years. While veterans can still enjoy many of the program’s original benefits, 2024 brings some important updates that you should be aware of.
No More “Unlimited” Use of Funds
In the past, you could use the cash from a VA cash-out refinance for any purpose you wanted. However, 2024 VA cash-out eligibility guidelines limit the reasons the cash can be used. Homeowners can still access cash, but the funds must be applied toward specific goals, such as:
- Paying off high-interest debts
- Making home improvements
- Consolidating mortgages
- Building your savings by reducing your loan term or interest rate
Understanding these changes is crucial before you start your refinance process. If you’re unsure whether your intended use of the cash qualifies, contact your lender for clarification.
How to Qualify: VA Cash-Out Eligibility Guidelines in 2024
To be eligible for a VA cash-out refinance, you must satisfy the VA cash-out eligibility guidelines. Let’s break these down to see if this is the right option for you.
You Must Have a VA Loan Entitlement
You must have remaining entitlement to be eligible for a VA cash-out refinance. You must either have a current VA loan or qualify based on your past service.
Eligible borrowers include:
- Veterans
- Active-duty service members
- National Guard and Reserve members
- Surviving spouses (in certain circumstances)
If you need clarification on your entitlement, contact your lender or request a VA Certificate of Eligibility (COE). This document confirms that you qualify for a VA loan or refinance.
Credit Score Requirements
The VA doesn’t require a minimum credit score, but most lenders have their own credit score requirements. Typically, in 2024, you will need a 620 credit score or above to qualify for the most favorable interest rates. If your score is below 620, don’t worry! Some lenders specialize in working with borrowers with lower credit scores — some even accept scores as low as 500.
If your credit score is lower than you’d like, taking steps to improve your credit before refinancing can help you qualify for better terms.
Residual Income Requirements
VA loans have specific guidelines around residual income — the money you have left after paying your monthly expenses. In 2024, residual income is still a crucial part of the VA cash-out eligibility guidelines.
To qualify for a cash-out refinance, your lender will calculate your residual income based on the following:
- Your household size
- Your monthly expenses
- The cost of living in your area
Ensuring you have enough leftover income to cover life’s daily expenses is a key factor in your approval.
Loan-to-Value Ratio
One of the unique benefits of the VA cash-out refinance is that you can borrow up to 100% of your home’s value. However, for 2024, the loan-to-value ratio (LTV) limit for a VA cash-out refinance has been reduced slightly to 90% in some cases. This change may depend on your lender or your individual financial situation, so it’s worth discussing your options with your loan officer.
If your home has appreciated in value since you purchased it, you could access more cash by refinancing. Your lender will order an appraisal to determine your home’s current market value.
The Benefits of VA Cash-Out Refinance
In 2024, it may be a wise financial decision to consider refinancing your VA loan. Here are a few reasons homeowners are taking advantage of the VA cash-out refinance program.
1. Consolidate Debt: High-interest debt can weigh you down, especially with credit cards or personal loans. Using your home’s equity, you can pay off those debts and combine them into one monthly payment. With interest rates on mortgages typically lower than on credit cards, this can save you thousands of dollars in the long run.
2. Lower Your Monthly Payment: Refinancing could reduce your monthly mortgage payment if interest rates are lower than when you originally took out your VA loan. Even a small reduction in your rate can mean big savings over the life of the loan.
3. Home Improvements: Want to upgrade your kitchen or build an addition to your home? The VA cash-out refinance allows you to use the cash for home renovations, increasing your home’s value and creating a more comfortable living space.
4. Switch to a Fixed Rate: If you currently have an adjustable-rate mortgage (ARM), switching to a fixed-rate loan through a VA cash-out refinance can give you the peace of mind that your payments will stay the same over time, regardless of market fluctuations.
What is the Net Tangible Benefit Test?
Before you can be approved for a VA cash-out refinance, your lender must ensure that the refinance will provide you with a net tangible benefit. This means the new loan must improve your financial situation clearly and clearly. Here are some examples of net tangible benefits:
- Lowering your interest rate
- Moving from an ARM to a mortgage with a fixed rate
- Decreasing the duration of your loan (for instance, from 30 years to 15 years)
- Increasing your residual income
This test is required to protect borrowers from predatory lending and ensure that refinancing actually benefits the homeowner.
Steps to Apply for a VA Cash-Out Refinance
Ready to refinance your VA loan? Follow these steps to get started:
- Get Your COE – Make sure you have your Certificate of Eligibility on hand.
- Compare Lenders – While the government backs VA loans, they’re offered through private lenders. Shop around for the best interest rates and terms.
- Get Pre-Approved—Before proceeding, get pre-approved by your lender to determine how much cash you can borrow.
- Schedule Your Appraisal – Your lender will order an appraisal to determine your home’s current value.
- Close Your Loan – Once everything is in place, you’ll sign the closing documents, and the lender will distribute your funds.
Why Choose Us?
Non-QM Mortgage Lenders specialize in helping veterans and service members secure the best VA loans, even if other lenders have turned them down. We’re licensed in 48 states and have a reputation for helping borrowers with low credit scores, unique financial situations, and complex loan needs. We work tirelessly to ensure you get the best rates and terms for your VA cash-out refinance.
Frequently Asked Questions About VA Cash-Out Eligibility Guidelines:
1. What is a VA cash-out refinance? A VA cash-out refinance lets homeowners with a VA loan replace their current mortgage with a new one and take out cash based on their home’s equity. This cash can be used for things like paying off debt, home improvements, or covering large expenses.
2. What are the 2024 updates to VA cash-out eligibility guidelines? The biggest change in 2024 is that the cash from a VA cash-out refinance must be used for specific purposes, like paying off high-interest debts, home improvements, or consolidating mortgages. You can no longer use the cash for just anything.
3. Can I qualify for a VA cash-out refinance if my credit score is below 620? According to the VA cash-out eligibility guidelines, you can still be eligible for a VA cash-out refinance with credit scores below 620. Although many lenders prefer a credit score of 620 or above, some focus on assisting borrowers with lower credit scores, going as low as 500, based on your financial circumstances.
4. What is the loan-to-value (LTV) ratio for a VA cash-out refinance in 2024? In 2024, the loan-to-value ratio for a VA cash-out refinance can increase to 100% in many cases. Still, some lenders may limit it to 90%, depending on your situation. An appraisal will determine your home’s current value.
5. Do I need a VA loan to qualify for a VA cash-out refinance? To be eligible for a VA cash-out refinance, you must have a VA loan or remaining entitlement from your military service. Veterans, active-duty service members, National Guard members, and eligible surviving spouses can qualify.
6. Can I use the cash from a VA refinance to pay off high-interest credit card debt? Yes, paying off high-interest debt is one acceptable use for cash from a VA cash-out refinance under the 2024 VA cash-out eligibility guidelines. This can help you consolidate your debt into one lower monthly payment.
7. What is the net tangible benefit test for VA cash-out refinances? The net tangible benefit test ensures the refinance will improve your financial situation. For example, lowering your interest rate, shortening your loan term, or switching from an adjustable to a fixed rate are all considered tangible benefits.
8. How can I qualify for a VA cash-out refinance with lower monthly payments? If current interest rates are lower than when you took out your original VA loan, you can qualify for a refinance that reduces your monthly payments. Lowering your loan term or consolidating debt can also help reduce monthly costs.
9. How much cash can I take out with a VA cash-out refinance? In 2024, depending on your lender and the appraisal, you can take out up to 100% of your home’s value through a VA cash-out refinance. Some lenders may limit the loan-to-value ratio to 90%.
10. Do I need an appraisal for a VA cash-out refinance? Yes, an appraisal is required for a VA cash-out refinance to determine the current market value of your home. This helps calculate how much equity you can cash out.
Borrowers who need a five-star national mortgage company licensed in 48 states with no overlays and who are experts on VA cash-out eligibility guidelines, please contact us at Non-QM Mortgage Lenders at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.
This blog about “VA Cash-Out Eligibility Guidelines: How to Qualify in 2024” was updated on September 18th, 2024.
