How Does VA Eligibility Affect Cash-Out Refinance LTV Limits and Funding Fees?
A VA cash-out refinance can go up to 100% of your home's value, though many lenders stop at 90%, compared with about 80% on a conventional cash-out. You skip the funding fee if you receive VA compensation for a service-connected disability. It has to be your primary residence with an existing mortgage, and it isn't available on a Texas homestead.
Last updated September 29, 2026How much can I borrow, and how does the funding fee work?
VA allows a cash-out refinance up to 100% of the home's value, and lenders often set their own limit, commonly 90%. That's well above the roughly 80% limit on a conventional cash-out.
Most VA loans carry a funding fee, but you're exempt if you receive compensation for a service-connected disability, at any compensable rating, so 10% counts as much as 100%. The exemption applies no matter how large the loan or the cash-out.
Credit matters too. Lenders in our network commonly lower the maximum cash-out, sometimes to around 65% to 70% of the home's value, when a borrower's credit score is low, for example in the 500s. So a lower score can limit the cash you can reach, even if you qualify.
Can I do a VA cash-out on a paid-off home, or in Texas?
Not on a home with no mortgage. VA's refinance rules cover refinancing an existing lien on the property, so a free-and-clear home would need a different cash-out loan, like conventional or FHA.
Texas has its own rule. The state's Attorney General concluded in 2018 (Opinion KP-0183) that the VA guaranty counts as extra collateral the Texas Constitution doesn't allow, so a VA cash-out refinance isn't permitted on a Texas homestead. Texas homeowners usually use a conventional cash-out instead.
Can I use VA for a second home or investment property?
No. VA loans, purchase or refinance, require the property to be your primary residence.
It depends on your situation:
- Your primary home has a mortgage and equity: a VA cash-out may go up to 100% of value, often 90% by lender limit.
- Your home is paid off: ask about a conventional or FHA cash-out.
- Your home is a Texas homestead: a VA cash-out isn't allowed; look at a conventional one.
- It's a second home or rental: VA doesn't apply.
- Your credit score is low: expect a lower maximum.
- You receive disability compensation: no funding fee.
| Primary home with a mortgage | Yes |
|---|---|
| Paid-off home | No |
| Texas homestead | No |
| Second home or investment property | No |
| Receiving disability compensation | Yes |
Related questions
- what's the Difference Between an FHA Loan and a Conventional Loan
- how Do DD-214 Status, an Early or Incomplete Discharge, or Being a Veteran's Dependent Affect VA Loan Eligibility
- does an FHA Streamline Refinance Require an Appraisal or Income Verification
- what Are FHA and Conforming Loan Limits, and When Do You Need a Jumbo Loan
- minimum credit score to qualify
Sources
- https://www.ecfr.gov/current/title-38/chapter-I/part-36/subpart-B/section-36.4306
- https://www.veteransunited.com/refinance/cashout
- https://benefits.va.gov/benefits/derivative_sc.asp
- https://www.mortgagelaw.com/insights/texas-home-equity-lending-and-prohibited-additional-collateral-part-two-va-guaranties-and-fha-mortgage-insurance
- https://selling-guide.fanniemae.com/sel/b5-4.1-01/texas-section-50a6-loans
- https://www.bankrate.com/mortgages/va-cash-out-refinance
- https://www.veteransunited.com/valoans/va-loan-for-investment-property
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.