The Quick Read: Usually, yes, up to a limit. On a VA cash-out refinance, allowable closing costs and the funding fee can be paid from the new loan or from your cash proceeds, as long as the total loan stays within 100% of the home’s appraised value. Anything above that ceiling must come out of your pocket. And “financed” never means free: every cost you fold in raises your balance and shrinks the cash you walk away with.
What Does “Finance All Closing Costs” Actually Mean Here?
Three different things hide inside that phrase. Mixing them up is why so many articles contradict each other.
- Financed into the loan: the cost is added to your new balance, and you repay it with interest over the term.
- Paid from proceeds: the cost is subtracted from the cash you would otherwise receive at closing.
- Paid separately: you bring money to the table, or a seller or lender credit covers it.
On a VA cash-out, the first two do most of the work. Both end up in the same place. Either way, the costs reduce your net equity. One route raises the balance by a larger amount; the other shrinks your check. The math lands close to the same spot.
Here is where purchase-loan advice misleads people. On a VA purchase, generally only the funding fee can be financed. Other costs come from the buyer, the seller, or credits. A cash-out refinance is different. You are borrowing against equity you already own, so there is a pool of value to draw from.
How Much Can You Borrow Before Costs Hit a Wall?
The ceiling is 100% of the appraised value, and the financed funding fee counts toward it. Across the wholesale programs Lendmire places VA files with, the VA cash-out reaches 100% of the appraised value including the financed fee. It also refinances any loan type into VA, not just an existing VA loan. The mechanics are covered in Lendmire’s VA cash-out refinance program page.
Think of it as a simple budget:
1. Start with the appraised value. That is your ceiling.
2. Subtract what you owe on the current mortgage and any other liens.
3. What remains is the room for cash to you, the funding fee, and closing costs.
If the funding fee would push the loan above 100%, the excess portion must be paid in cash at closing. That rule comes from VA’s regulation on refinancing loans. VA’s Lenders Handbook (VA Pamphlet 26-7) says the same thing in practical terms: you need cash for any closing costs or prepaids that are not financed into the loan, and for any shortfall when the value comes in low.
So the real question is not “can costs be financed?” It is “how much room is left under the ceiling after the payoff?” A homeowner with a lot of equity has plenty of room. A homeowner who owes close to the full value has almost none, and costs may need to come out of pocket.
One more point on appraisal. The appraisal sets the ceiling, and nobody can promise it ahead of time. A value that lands lower than you hoped shrinks every number above it.
Which Costs Can Go Into the Loan and Which Can’t?
Most allowable costs can be covered from the loan or proceeds. The funding fee is the one VA specifically lets you include in the loan. The table below separates the common items by how they are usually handled.
| Cost item | Typical treatment on a cash-out | Your control |
|---|---|---|
| Funding fee | Financed in the loan, or paid in cash | Exempt veterans owe none |
| Appraisal | Paid from loan or proceeds | Lender orders it |
| Title and recording | Paid from loan or proceeds | Often shoppable |
| Credit report | Paid from loan or proceeds | Set by the lender |
| Prepaids and escrows | Paid from loan or proceeds | Depends on your policy and taxes |
Treat this table as a general pattern, not a promise. Which items are allowable, and how they are handled, depends on lender guidelines and a full review of your file. Your Loan Estimate lists each charge, and your Closing Disclosure shows the final numbers. Compare the two line by line.
There is one more thing worth knowing. Federal rules bar brokerage charges against the veteran for obtaining a VA guaranty. The charges and fees rule at 38 CFR 36.4313 governs what can be charged. If a line item looks like a fee for simply obtaining the guaranty, ask about it.
How Does the Funding Fee Fit In?
The funding fee is a percentage of the loan, charged by VA, and it is the largest single cost for most borrowers. On a cash-out refinance, VA’s own funding fee explainer lists 2.15% for first use and 3.3% after first use. VA’s funding fee and closing costs page carries the same schedule.
Two facts surprise people:
- A bigger down payment does not lower the cash-out fee. The cash-out tiers turn on first use versus later use. The down-payment tiers apply to purchases.
- The fee is not negotiable. It is set by VA and statute, not by the lender.
Veterans who receive compensation for a service-connected disability pay no funding fee. Certain surviving spouses and some Purple Heart recipients are also exempt. For these borrowers, more room sits under the 100% ceiling. More of the equity stays in your hands.
Your Certificate of Eligibility decides your status. If you are not sure whether you are exempt, check it before you compare any numbers. The difference can be large.
What Does Financing Everything Do to Your Cash?
It shrinks it, dollar for dollar. Here is the plain formula:
Net cash to you = new loan − payoff − other liens − funding fee − closing costs.
That is a definition, not a VA-published formula, but it never fails. Pay costs in cash and your check is bigger, but you spent savings. Finance them and your check is smaller, but you spent nothing at the table.
Picture a veteran with a home worth a round number and a payoff well below it. Say the new loan is set at the 100% ceiling. The funding fee, appraisal, title, and prepaids all come out of that loan. Whatever remains is the cash. Now picture a second veteran who brings money to closing to cover the title and appraisal. Her loan is smaller, her balance is lower, and her cash-out check is the same size or slightly larger. She gave up cash on day one and avoided interest on those costs for years.
Neither choice is wrong. They answer different questions: do you need maximum cash now, or minimum cost over time?
What Is the Hidden Cost of Financing Closing Costs?
Interest. Every financed dollar becomes principal, and principal earns interest for as long as you hold the loan. A larger balance also means a larger loan basis for the funding fee, since that fee is a percentage of the loan amount.
Three effects stack up:
- A higher monthly obligation. More principal means more principal and interest each month. The exact amount depends on your terms, so no figure is quoted here.
- Less equity cushion. Borrowing to 100% of value leaves none. If prices dip, you could owe more than the home is worth.
- More total interest over time. Small costs financed over a long term add up.
A rough break-even test helps. Divide the costs by the monthly benefit of the new loan, such as a lower payment or the end of an old obligation. That tells you how long you must keep the loan for the refinance to pay for itself. A shorter horizon argues for paying some costs in cash.
Does the Refinance Have to Prove It Helps You?
Yes. A VA cash-out must pass a net tangible benefit test. VA’s regulation lists qualifying benefits. Examples include eliminating monthly mortgage insurance on the old loan and moving to a shorter term. The lender must also give you a written comparison of the old and new loans.
There is a second test when the new loan is not larger than the payoff. VA calls this a Type I cash-out. In that case, all fees and costs must be scheduled to be recouped within 36 months, according to VA’s lender conference materials. This is the case where “financing all the costs” matters most. Whether a given file meets the test is a lender call after full review.
Seasoning applies as well. Across the programs Lendmire works with, the VA cash-out carries the same seasoning as the IRRRL: the later of 210 days from your first payment and your sixth payment. It applies when you refinance an existing VA loan.
How Is This Different From a VA Streamline?
The streamline, formally the IRRRL, cannot give you cash. It refinances an existing VA loan into a new VA loan, including a move from adjustable to fixed, with no VA appraisal and a 0.5% fee unless you are exempt. It also needs a net tangible benefit.
| Feature | Cash-out refinance | IRRRL streamline |
|---|---|---|
| Cash to you | Yes, from equity | No |
| Appraisal | Required | Not required by VA |
| Funding fee | 2.15% first use, 3.3% after | 0.5% unless exempt |
| Loans it can pay off | Any loan type | An existing VA loan |
| Underwriting | Full | Lighter |
If you want a closer look at the cash side, Lendmire has a piece How Much a VA Cash-Out Nets After the Funding Fee and Closing Costs.
What Else Decides Whether You Qualify?
VA sets no minimum credit score. Lenders set their own, and some set a higher floor than others. Across the wholesale programs Lendmire places VA loans with, the floor starts at a 580 decision score. VA loans are underwritten, closed, and serviced by private lenders, not by VA, as the Consumer Financial Protection Bureau explains. You still have to show you can repay.
Here is how the file gets judged in practice:
- Residual income is the controlling test. That is the money left each month after major obligations and living costs.
- The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table.
- Occupancy matters. A cash-out is for a home you live in as your primary residence.
- Value matters most. The appraisal sets the ceiling for everything above.
A VA cash-out also has no mortgage insurance of any kind, which is a real advantage over many conventional cash-outs. A full entitlement carries no VA loan limit, and the wholesale programs serve amounts up to $4,000,000. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Should You Finance Everything?
Finance most or all of it when:
- You need the cash for a goal that clearly pays off, like paying down higher-cost debt or fixing the roof.
- You would rather keep savings liquid.
- You are exempt from the funding fee, which leaves more room.
- You plan to keep the loan for a long time and the break-even looks fine.
Pay some costs in cash when:
- Your equity is thin and you would sit right at the 100% ceiling.
- You plan to sell or refinance again soon.
- You want a smaller balance and less interest.
- The appraisal comes in below your hopes and the numbers get tight.
Common mistakes are simple to avoid. Don’t assume a VA loan has “no closing costs.” The funding fee and ordinary third-party charges still apply. Don’t assume financed costs are free money. They are repaid with interest. And don’t size your request before you see the appraisal.
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
Can I finance the VA funding fee on a cash-out refinance?
Yes. VA lets the funding fee be included in the new loan. It counts toward the 100% ceiling, so if it would push you past the ceiling, the excess must be paid in cash.
Will I get any cash if I finance every closing cost?
Possibly, but less. Financed costs come off your proceeds, so the check shrinks by the same amount. If your equity is thin, the costs could consume most or all of the cash. Run the formula early so the number isn’t a surprise.
Does a bigger down payment lower the cash-out funding fee?
No. The cash-out tiers depend on first use versus later use, not on down payment. First use is 2.15% and later use is 3.3%. Down-payment tiers apply to purchase loans.
Can a streamline refinance put cash in my pocket?
No. The IRRRL pays off your existing VA loan and its own costs, with no equity returned. Cash back requires a cash-out refinance. For a related look at how another program handles costs, see Lendmire’s piece Can You Finance All FHA Cash-Out Closing Costs?.
What if the appraisal comes in low?
The ceiling drops with it. Less room means less cash to you, and you may need to pay some costs at closing. In some cases the refinance no longer makes sense. That is a decision to make with your loan officer once the value is in.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. As a mortgage broker, Lendmire arranges these loans through wholesale lenders; it does not lend directly, and each file is subject to lender review. For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. eCFR: 38 CFR 36.4313, Charges and fees
2. VA News: Funding fee, who pays and who is exempt
3. VA: Funding fee and closing costs
4. VA’s lender conference materials
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: Can Every VA Cash-Out Closing Cost Be Financed Under the Cap? · VA Cash-Out vs Jumbo Cash-Out for a Veteran With a High-Value Home · How Much a Funding Fee Costs on a VA Cash-Out 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.