VA Cash-out Refinance
Guidelines
All VA loans must be underwritten by the Fannie Mae desktop underwriter system or the Freddie Mac Loan prospector advisor and receive an Approve/Eligible (Fannie Mae) or a Accept/Eligible (Freddie Mac)
Eligible Veteran
An individual who served on active duty in the Army, Navy, Air Force, Marines, or Coast Guard, and who, (except for a service member on active duty) was discharged or released from active duty under conditions other than dishonorable; or was a member of the Reserves and National Guard upon completion of 6 years of service; or an unmarried surviving spouse of a veteran who died as a result of service or service-connected causes.
Credit
– Minimum Credit score of 580
– All borrowers must have a valid social security number
– All borrowers must have at least one valid credit score
– Borrowers using non-traditional credit are not allowed.
Salaried | Hourly Borrowers
– Two-year employment history must be documented via the two most recent tax returns
– Previous two years W-2s
– Recent paystubs to illustrate earnings for the previous 30 days
Self-Employed Borrower
– Business must have been in existence for at least two years
– Personal signed individual tax returns as well as the corporate or partnership tax returns for the two most recent tax periods
Properties Listed for Sale
– Primary residence only |Limited Cash-Out | Cash-Out Refinance loans
– The subject property must be taken off the market on or before the loan closing date and the borrower must confirm their intent to occupy the subject property
Minimum Credit Score
– Minimum credit score of 580 required for all borrowers, regardless of Automated Underwriting decision.
Minimum Loan Amount
– Minimum loan amount $125,000 for all property types
Multiple financed properties
– Primary residence loan- No limits to the number of financed properties
– 2nd Home | Investment property- maximum 10 financed properties
Student Loans
– Underwriting may use the payment on a current credit report or a recent statement for qualifying purposes
– Otherwise 0.5% of the outstanding loan balance reported on the credit report will be calculated to determine the monthly obligation
Maximum Loan to Value
– 100% LTV/CLTV for cash out: Based on the property value indicated on the VA Notice of Value plus the cost of energy efficiency improvements plus VA funding fee. There must be a lien of record and the veteran must occupy the property.
Cash-out
– Refinance transactions must pay off a lien secured by the subject property (i.e., mortgages, tax liens, judgment liens, etc.). Cash out refinance of a free and clear property is not allowed.
Mortgage rating
– No mortgage lates accepted in the last 12 monthsÂ
Qualifying Ratios
– Current guidelines refer to the Fannie Mae or Freddie Mac automated underwriting response
– Traditional guidelines are capped between 45-50% maximum debt to income, although VA ratios often exceed 50% with excellent credit
Rental Income
– Will be determined by the supplemental income/loss reported on the respective Schedule E from the two previous tax periods.
Reserves
– Based upon the Fannie Mae or Freddie Mac automated underwriting response
– 2-4 Unit properties require 6 months of the total monthly obligation, if rental income is being used to qualify the veteran
Appraisal
– All VA loans will require a traditional VA Notification of Value, which will be done by a VA determined appraiser.
Seller concessions
– May not exceed 4% of the value of the property as indicated on the Notice of Value
Bankruptcy
– CH7 Bankruptcy requires 24 months seasoning from discharge date
– CH13 Bankruptcy requires 12 months worth of acceptable payments have been made
Foreclosure
– Minimum 24 months seasoning from completion
Texas
– A6 loans not allowed
2-4 Unit Properties
– Require 6 months PITIA in reserves if rental income is used to qualify
Non-borrowing Spouse
– Credit report for must be pulled in community property states with individual debts being included in the DTI. This applies if the subject property is located in a community property state or if the borrower’s primary residence is in a community property state even though the subject property is not in a community property state.