VA Cash Out Refinance Rules for Pennsylvania
VA Cash Out Refinances in Pennsylvania and the rest of the nation allow Veterans to tap into the equity in their home to consolidate bills, payoff higher rate mortgages or just to obtain cash.
The Department of Veterans Affairs has a broader classification of what constitutes a cash out refinance than other types of mortgage financing. The VA considers any refinance that pays off a non VA mortgage or pays off a VA mortgage plus any other debt to be a cash out refinance, regardless of whether the Veteran receives cash at closing or not. Essentially this means that the VA will call any refinance a cash out refinance unless it is a VA streamline refinance, also known as the VA IRRRL program.
Technically, the VA does allow a Veteran to take 100% of the appraised value with a cash out refinance to payoff any mortgages, any other non-mortgage related debt and receive cash at closing. While these might be the base VA underwriting guidelines, practically all lenders have their own requirements on top of the base VA guidelines. These additional underwriting guidelines, often called Underwriting Overlays, create additional restrictions that put limits on what the VA will allow. More can be read about underwriting overlays here.
The vast majority of VA lenders that I have seen limit a VA Cash Out refinance to 90% of a home’s value when receiving cash or paying off any debt outside of the first mortgage. Under the VA’s classification of what is considered a cash out refinance, we do have a VA CashOut program to 100% of the appraised value, with cash at closing available to 95% of the appraised value.
Below is the program available that most closely resembles the base VA guidelines for maximum loan to value under the VA Cash Out Refinance guidelines…
100% of the Appraised Value
620 minimum credit score
Payoff of any mortgages on property only
Payoffs of any non-mortgage debt not allowed
Cash not allowed at closing
95% of the Appraised Value
640 credit score minimum
Payoff of mortgages on property
Payoff of non-mortgage debt allowed
Cash allowed at closing
Credit scores 620-639 allowed but limited to 90% of the Appraised Value