The Quick Read: On a VA cash-out refinance, the new loan can reach 100% of the home’s appraised value, and the financed funding fee counts inside that ceiling. A first-time user pays the lower fee tier, 2.15% of the new loan. Your appraisal, your payoff, and your residual income usually decide how much cash you actually receive. All of this is subject to lender guidelines and full file review.
Most borrowers read “tier limits” as one number. It is really two sets of tiers, and the second set trips people up.
Key Takeaways
- Fee tiers: The cash-out funding fee is 2.15% on first use of the VA benefit and 3.3% after that. Down payment and equity do not change it.
- Leverage ceiling: VA’s ceiling is 100% of appraised value, financed fee included. Lower caps come from lenders, not from VA.
- Credit floor: VA sets no minimum score. The wholesale programs Lendmire places VA loans with start at a 580 decision score.
- What binds first: Appraised value, your current payoff, and residual income. The ceiling is the last limit most people reach.
- Occupancy: You must live in the home. Cash-out is not available on a property you do not occupy.
Key Terms Defined
Cash-out refinance: A new mortgage larger than the one you owe. It pays off the old loan, and you keep the difference in cash.
Appraised value: The value a VA appraiser assigns the home. It is the number every percentage limit is measured against.
Funding fee: A one-time VA charge, expressed as a percentage of the new loan. Exempt veterans, such as those receiving compensation for a service-connected disability, do not pay it. It can be financed.
Residual income: The money left each month after your taxes, debts, and housing costs. VA uses it to test whether you can carry the loan.
First-time user: Here, someone using the VA home loan benefit for the first time. It does not mean a first-time homebuyer.
Net tangible benefit: A test showing the new loan actually helps you. The lender must run it.
What “First-Time” Means Here
“First-time” has two meanings online, and only one applies. A first-time homebuyer program has nothing to do with this article. In VA lending, “first-time” means first use of your VA benefit.
That status sets your funding-fee tier. It also tells the lender whether the loan is a refinance into the VA program or a VA-to-VA refinance. The difference matters, as the edge cases below show.
A first-time user with a conventional or FHA mortgage can use a VA cash-out to refinance that loan into a VA-backed one. VA’s cash-out page confirms the loan being paid off can be any type. You also need a Certificate of Eligibility and must meet VA’s and the lender’s credit and income standards.
One quirk is worth knowing. If your only earlier VA loan financed a manufactured home, you still pay the first-use fee, per VA’s funding fee page.
The Two Sets of Tiers
The word “tier” covers the fee schedule and the leverage ladder. Take them one at a time.
Tier set one: the funding fee
| Your situation | Cash-out funding fee |
|---|---|
| First use of the VA benefit | 2.15% of the new loan |
| Used the benefit before | 3.3% of the new loan |
| Exempt (e.g., service-connected disability compensation) | Waived |
Purchase loans have extra tiers tied to down payment. Cash-out does not. A bigger equity cushion does not lower the fee. VA’s page confirms the fee on a refinance depends on first versus later use.
Older charts show 2.3% and 3.6%. Those are outdated purchase-schedule figures. Ignore them.
The fee is a percentage of the whole new loan. A larger cash-out means a larger fee. You can finance the fee, but only up to the ceiling. Any part that would push the loan past 100% of value gets paid in cash at closing.
Tier set two: the leverage ladder
Picture the limits as steps, from highest to lowest:
1. VA’s ceiling: 100% of appraised value, financed fee included.
2. The lender’s cap: Some lenders stop below 100%. That is their rule, not VA’s.
3. The benefit line: Keeping the new loan well under the home’s value is one way to satisfy the net tangible benefit test. The regulation sets that line, and your loan officer will confirm where it sits.
4. Your own comfort level: Borrowing near the top leaves almost no equity cushion.
Across the wholesale programs Lendmire places VA files with, the cash-out reaches the full 100% of appraised value. A first-hand note from that work: borrowers who ask “what is the maximum?” often do better asking “what is the right amount?” The top of the ladder is available. It is not always wise.
The rule behind step one is in 38 CFR 36.4306. It caps the loan at 100% of the reasonable value set by VA.
How the Loan Is Built, Step by Step
Here is the sequence a first-time user goes through on the VA cash-out refinance program.
1. Eligibility. You get your Certificate of Eligibility from VA. You must occupy the home.
2. Payoff. The new loan pays off your existing lien in full.
3. Appraisal. VA requires an appraisal on cash-out refinances. The result sets the “reasonable value.” It is the denominator for every percentage limit, so a low appraisal shrinks your cash.
4. Full underwriting. The lender documents credit, income, and residual income. This is a full-file loan, not a streamline.
5. Net tangible benefit test. The lender shows you the test and a comparison of old and new loans. That comparison covers payoff amount, term, total cost, and loan-to-value. VA will not guarantee the loan unless the required disclosures are in the file.
6. The math. The new loan equals your payoff, plus costs, plus the financed fee. The total is capped at 100% of value. Your cash is what remains after payoff, fee, and costs.
7. Closing. You pay any costs not financed.
Notice what is missing: a maximum cash-out amount in dollars. VA sets none. With full entitlement, the wholesale programs Lendmire works with serve loan amounts up to $4,000,000. If you have used part of your entitlement before, speak with a loan officer about how that affects the numbers. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Here is the rest of the credit picture. VA does not set a minimum credit score, but lenders do. The programs Lendmire works with start at a 580 decision score, and some lenders set a higher floor. That is a lender rule layered on top of VA’s.
Which Limit Binds First?
Equity decides the ceiling. Underwriting decides whether you get there. Here is how it plays out in three situations, described as shares of appraised value.
| Your equity position | What limits your cash | Practical read |
|---|---|---|
| Low equity (payoff near 95% of value) | The ceiling | Little room is left, and the fee and costs consume most of it |
| Middle equity (payoff near 80% of value) | Residual income and your comfort level | Real room exists, but a bigger loan raises the fee |
| High equity (payoff near 60% of value) | Residual income and your budget | The ceiling is far off, so your monthly numbers decide |
Low equity. The gap between payoff and 100% must cover the funding fee and closing costs. If it cannot, you pay the shortfall in cash, which defeats the purpose. A low appraisal makes this worse.
Middle equity. This is where most first-time users land. The ceiling leaves meaningful room. The real question becomes how much you need and what the added balance does to your budget.
High equity. The ceiling stops mattering. VA’s residual income test, plus a debt-to-income ratio, become the gatekeepers.
On that point: the 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above VA’s table. Residual income is the controlling test. Many borrowers who fail a conventional ratio pass this one.
First Use Versus Later Use
A first-timer has a real advantage. The fee is 2.15%, versus 3.3% after first use. On a large loan, that gap is meaningful. If you are exempt, the fee is waived either way.
The other first-time difference is seasoning. Seasoning is a waiting period between an old loan and a refinance. It applies only to VA-to-VA refinances, per VA’s own cash-out guide. The wholesale programs Lendmire works with set it at the later of 210 days from your first payment and your sixth payment.
If you are refinancing a conventional or FHA loan into VA for the first time, VA’s guide shows no seasoning certification for you. The lender may still have its own timing rules. A VA-to-VA refinance has additional checks, including a certification on seasoning and, for some loans, recoupment of fees through savings over a set period.
Where the General Rule Breaks
The 100% rule and fee schedule cover most files. A few situations bend them.
- Exempt veterans. The funding fee is waived for veterans receiving compensation for a service-connected disability and for other exempt groups. Your Certificate of Eligibility shows your status.
- Surviving spouses. A spouse’s entitlement is independent of the service member’s. A surviving spouse who was not on the original loan can use a cash-out, not the streamline, once qualified as a surviving spouse.
- Native American Direct Loan. This program has its own fee schedule. Do not apply the standard cash-out fee tiers to it.
- State rules. Some states limit cash-out leverage by law. Texas is the best-known example. Ask a loan officer how your state treats it.
- Paid-off homes. A home with no mortgage can be an awkward fit for a cash-out structure. Talk through the options before assuming.
- Streamline confusion. The streamline refinance (IRRRL) cannot take equity out. It needs no appraisal and carries a 0.5% fee unless you are exempt. A cash-out is a different product with full underwriting.
- Rentals and second homes. Occupancy decides it. You must live in the home, so a rental or second home does not qualify.
Cash-Out or Something Else?
Think of the decision in terms of equity and purpose.
If you have little equity, the ceiling and fee leave almost no net cash. A second lien or waiting may fit better. If you have moderate equity and need a sizable sum, a cash-out can make sense, particularly if your current loan has mortgage insurance or an adjustable structure. VA loans carry no mortgage insurance.
Weigh these costs before you decide:
- A larger loan means a larger funding fee.
- Financing the fee and costs raises your balance and extends interest.
- Borrowing near 100% leaves little cushion if values dip.
- Your old loan’s features, such as a fixed structure you like, disappear when it is paid off.
Beware unsolicited offers that look official. The CFPB and VA have warned that mailers promising impossible savings can mislead veterans, and that repeated refinancing, called churning, can leave you worse off. Insist on the written comparison of old and new loans.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
Is there a maximum dollar amount on a VA cash-out?
VA sets none on a cash-out with full entitlement. The limit is 100% of appraised value, financed fee included. The wholesale programs Lendmire works with serve amounts up to $4,000,000 with full entitlement. If you have used some entitlement before, a down payment may be needed, so speak with a loan officer.
Does more equity lower my funding fee?
No. On a cash-out refinance, the fee depends only on whether this is your first use of the benefit: 2.15% for first use, 3.3% after. Exempt veterans pay nothing. More equity helps in other ways, such as leaving more room under the ceiling.
Can I use a VA cash-out to refinance a conventional or FHA loan?
Yes. VA’s cash-out can pay off any loan type and move you into a VA-backed loan. You still need a Certificate of Eligibility, a VA appraisal, and full underwriting. Seasoning rules apply to VA-to-VA refinances, though your lender may have its own timing requirements.
What credit score do I need?
VA sets no minimum score. Lenders set their own. The wholesale programs Lendmire places VA loans with start at a 580 decision score, and some lenders require more. Credit is only part of the review. Residual income carries the most weight.
What if my appraisal comes in low?
A low appraisal lowers the value that the 100% ceiling is measured against. That shrinks the room for cash, fee, and costs. You can discuss options with your loan officer, including borrowing less or waiting. Whether any option fits depends on your file and the lender’s guidelines.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. VA.gov – Cash-out refinance loan
2. VA.gov – Funding fee and closing costs
4. CFPB and VA WARNO – VA refinancing offers
This article is part of Lendmire’s VA Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: VA vs Conventional Cash-Out Requirements for a High-Equity Home · Can You Do a VA Cash-Out in Year One of an Existing VA Loan? · Is a VA Cash-Out Worth It for a Veteran With an Existing VA Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.