The Quick Read: Two fee systems apply to this topic, and they do not fit together on one loan. VA limits what a lender can bill a veteran, and Texas caps the fees on any cash-out loan against a homestead. Texas also treats the VA guaranty as extra collateral that a homestead equity loan cannot carry, so a VA cash-out on a Texas homestead is generally not written. This article explains each fee rule on its own, shows where they collide, and lays out what veterans do instead.
Key Takeaways
- A VA cash-out refinance reaches up to 100% of appraised value, including the financed funding fee, in states where it is allowed.
- Texas treats a homestead cash-out as a “Section 50(a)(6)” home equity loan and reads the VA guaranty as forbidden extra collateral.
- VA’s lender flat charge is capped at one percent. Texas caps required lender-side fees at two percent of the original principal.
- Veterans in Texas usually reach equity through a conventional Texas equity loan, or they keep or refinance a VA loan without taking cash out.
- Some web pages claim a Texas VA cash-out exists. The state’s official reading says otherwise.
Texas VA cash-out estimate
Seeded with an example value, a typical balance, and a round cash request at the first-use fee; change any field.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a VA cash-out refinance quote.
Illustrative starting assumptions: a $285,000 home value, a $157,000 current balance, the Texas homestead cap with the first-use funding fee financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical rates for Texas. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a VA cash-out refinance quote; a VA loan is priced by the lender at lock. The total loan, funding fee included, is capped at the program leverage on the reasonable value; the fee follows the tier chosen. The cash available is what the cap allows less the balances paid off and the fee, before closing costs, which are not included. The HELOC line is the line program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. The debt-to-income figure is a guideline; residual income decides a VA file. Licensed in sixteen states for consumer mortgages. On a Texas homestead the state constitution caps a cash-out refinance at eighty percent of value, fee included, and adds a waiting period, a prescribed closing location, and a fee cap; the calculator applies the Texas cap.
Why the Title’s Premise Needs Framing
Plenty of veterans search for the “allowable fees” on a VA cash-out in Texas. Many assume the loan exists and only the fee limits are in question. The real answer starts one step earlier.
Across the wholesale programs Lendmire places VA files with, a VA cash-out can reach 100% of the appraised value. It also refinances any existing loan type into VA. The funding fee can ride inside that balance. That is the national picture, and Lendmire’s VA cash-out refinance program page covers it in full.
Texas is the exception that trips people up. The state’s constitution puts tight rules on any loan that takes equity out of a homestead. Those rules include a fee cap, a loan-to-value ceiling, a waiting period before closing, and limits on what else can secure the loan. The VA guaranty runs into that last one.
So the useful question is not “which fees are allowed?” It is “which fee rules apply, and which loan can a Texas veteran actually use?” The sections below answer both.
How Do VA Fee Rules Work on a Cash-Out?
VA fee rules are strict and itemized. The veteran can pay three kinds of charges. Those are reasonable and customary amounts for VA’s itemized fees, a flat charge from the lender, and any permitted charges tied to the loan’s pricing. The VA Lenders Handbook, Chapter 8 sets this out.
The lender’s flat charge is the piece people misread. It cannot exceed one percent of the loan amount. When the funding fee is paid from loan proceeds, the one percent is figured on the balance after the funding fee is added.
That flat charge is meant to cover the lender’s own costs. The Handbook lists items the lender must absorb inside it:
- the lender’s appraisals
- closing or settlement fees
- document preparation fees
- escrow fees
- notary fees
There is a second layer. Under a VA program notice 26-14-10, a lender that charges the full one percent cannot also charge unallowable fees. The one percent and the unallowable fees together cannot exceed that threshold. “Unallowable” means not expressly permitted under VA’s fee regulation.
So “VA caps all my fees at one percent” is a myth. The one percent limits only the lender’s flat charge. The veteran can still owe VA-itemized third-party charges, reasonable points, and the funding fee.
The Funding Fee Sits Apart
The funding fee is VA’s own charge, paid by the veteran unless exempt. On a cash-out refinance, the program figures are 2.15% for first use and 3.3% for subsequent use. Veterans who receive compensation for a service-connected disability, and the other exempt groups, pay none. You can read VA’s own explanation on its funding fee and closing costs page.
The fee is financeable. That is convenient, but it raises the balance you carry and the interest you pay over the life of the loan. On a cash-out, the 100% value ceiling includes the financed fee, so the fee eats into the cash you can pull.
How Is a VA Cash-Out Underwritten, Step by Step?
In a state where a VA cash-out is permitted, the deal works in a set order.
1. Eligibility. The certificate of eligibility from VA decides whether you qualify. Service requirements are VA’s rules.
2. Appraisal. A VA appraisal sets the reasonable value that the 100% ceiling is measured against.
3. Credit and income review. The wholesale programs Lendmire works with start at a 580 decision score. VA itself sets no minimum.
4. Residual income. This is the controlling test. It measures what is left each month after debts 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.
5. Net tangible benefit and seasoning. The refinance has to help you in a real way. It also has to meet the same seasoning rule as other VA refinances.
6. Fee schedule. Itemized fees, the one percent flat charge, any reasonable points, and the funding fee are applied.
7. Value ceiling. The new loan, including the financed fee, cannot pass 100% of the appraised value.
That flow works wherever the loan is legal. Step one in Texas is different, and it changes everything after it.
Where Does Texas Break the Rule?
Texas does not treat a homestead cash-out as an ordinary refinance. It classifies it as a home equity loan under Article XVI, Section 50(a)(6) of the state constitution. That label brings a bundle of protections, and one of them is about collateral.
The Texas Attorney General took up this question in Opinion KP-0183. The opinion reasons that VA’s guaranty serves as collateral other than the homestead. Section 50(a)(6)(H) does not allow that, so a VA cash-out refinance cannot be made on a Texas homestead. The state’s savings and mortgage lending regulator reached the same conclusion, and older state commentary treats a guaranty or surety as forbidden additional collateral.
Here is the nuance. An Attorney General opinion is advisory. It is not a statute or a court ruling. In practice, lenders underwrite to it, and the wholesale channels Lendmire works with do not originate VA cash-out loans on Texas homesteads.
You may find pages that say a Texas VA cash-out is allowed at a reduced loan-to-value with a fee cap. Some sources assert it. The Attorney General’s opinion is the official source, and it points the other way. That mismatch is why a veteran can lose time chasing a loan that stalls at lender review.
Where the Two Fee Systems Collide
Even setting the collateral issue aside, the fee rules are built differently.
VA limits what the lender bills the veteran. Texas caps what the owner is required to pay for originating, evaluating, maintaining, recording, insuring or servicing the credit. That cap is set as a percentage of the original principal under 7 TAC §153.5, and it applies separately from interest.
A loan under both regimes would have to satisfy both. That is part of the dead end. The fee rules are not the main obstacle, though. The collateral rule is.
One more thing about the cap. It was once higher, and older pages online may still show the earlier figure. If a page quotes a different percentage, check its age before you rely on it.
Which Fees Count Toward the Texas Cap?
The Texas two percent cap does not cover every dollar at the closing table. It covers required lender-side charges. Several costs sit outside it.
The rule excludes third-party appraisal fees, a licensed surveyor’s property survey, and the state base title premium. In some cases a title examination report is excluded too. Charges paid at the owner’s sole discretion are not fees under the cap. Per diem interest is interest, so it is not capped either.
This is why total closing costs can exceed two percent without anything improper happening. The cap measures one slice, not the whole bill.
Here is how the pieces line up. The table sorts the common items by how each system treats them.
| Item | VA rule | Texas cap |
|---|---|---|
| Lender’s flat charge | Capped at 1% of loan | Counts toward the 2% |
| Lender processing and document prep | Must sit inside the 1% | Counts toward the 2% |
| Third-party appraisal | VA-itemized, reasonable amount | Excluded from the cap |
| Property survey (licensed surveyor) | Not a lender fee | Excluded from the cap |
| State base title premium | Not a lender fee | Excluded from the cap |
| Per diem interest | Not a fee | Not capped |
| VA funding fee | VA’s own charge, reviewable | Moot, because VA cash-out is not written |
Because a VA cash-out loan on a Texas homestead is not written, the question of how the funding fee would sit against the Texas cap does not come up in practice. If a lender tells you otherwise, ask to see the reasoning in writing.
What Do Texas Veterans Do Instead?
A veteran with equity in a Texas homestead still has real paths. They just are not a VA cash-out.
| Path | Takes cash out? | How fees are treated |
|---|---|---|
| Conventional Texas cash-out | Yes | Texas 2% cap applies, with set exclusions |
| VA IRRRL (streamline) | No | VA fee rules; funding fee 0.5% unless exempt |
| VA refinance without cash out | No | VA fee rules, funding fee by use |
| Keep the current VA loan | No | No new fees |
A conventional Texas cash-out is the usual route for veterans who need the equity. It carries Texas’ loan-to-value ceiling, the fee cap, a waiting period before closing, and the other homestead protections. Pricing and mortgage insurance work differently from VA. Lendmire’s piece comparing VA cash-out with conventional cash-out under Texas homestead rules walks through the tradeoffs.
An IRRRL refinances an existing VA loan to a lower rate or from adjustable to fixed. It needs no VA appraisal, carries a 0.5% fee unless you are exempt, and requires a net tangible benefit. Seasoning is the later of 210 days from the first payment and the sixth payment. An IRRRL takes no cash out. People confuse it with a cash-out all the time, and the two have nothing in common on that point.
A VA refinance without cash out can swap a non-VA loan into VA terms. The funding fee then follows the use tiers.
One more door exists in the Texas rulebook. A loan that was done as a Section 50(a)(6) equity loan may later be refinanced into a non-equity loan if certain conditions are met. The constitution lists those conditions, and they are strict. Confirm them with a licensed lender before assuming you qualify.
Does the Property Type Matter?
Yes, for the homestead rules. Section 50(a)(6) restricts only homestead property. A rental or other non-homestead property follows ordinary lending rules. Equity loans under Fannie Mae’s Texas Section 50(a)(6) eligibility rules are limited to a single-unit principal residence. That is a conventional loan rule, not a VA rule, but it shows how narrow the homestead lane is.
For VA, occupancy decides the picture. The program is built for the home you live in.
How Do You Check Your Own Fees?
You do not have to take a lender’s word for it. The Loan Estimate and the Closing Disclosure show the charges line by line. Use them like this.
1. Find the lender’s own charges. Origination, processing, underwriting and document prep sit together. On a VA loan they must fit inside the one percent flat charge.
2. Spot the third-party items. Appraisal, survey and title are listed separately. On a Texas equity loan, those named items sit outside the two percent cap.
3. Add up the capped bucket. On a Texas equity loan, the required lender-side fees should come in at or below two percent of the original principal.
4. Look at the funding fee. It should appear as VA’s charge, and it should be zero if you are exempt.
5. Question anything unfamiliar. A fee that is not a recognized VA itemized fee, and is not inside the flat charge, deserves an explanation.
6. Ask what happens on an overage. If a required fee pushes past a cap, the lender must fix it. Ask how, and get the answer in writing.
Lendmire is a mortgage broker, not the lender. It arranges these loans through wholesale lenders, so the final fee terms come from the lender that closes your loan. Compare the full terms of any offer.
What About the Timing Rules?
Texas adds a mandatory waiting period. The lender must give you a written notice on a separate form, and the loan cannot close before that waiting period runs. The constitutional text says so. A right to cancel after closing also applies on this type of loan. These protections add steps to a Texas equity loan that a VA refinance elsewhere does not have.
Common Mistakes
- Assuming VA cash-out works in Texas because it works nationally. Texas’s collateral rule blocks it.
- Reading an 80% and 2% pairing as proof of a VA option. Those limits belong to the conventional Texas equity structure. They do not show VA can be layered in.
- Treating two percent as the ceiling on all closing costs. It covers required lender-side fees only.
- Treating one percent as VA’s cap on everything. It caps the lender’s flat charge.
- Treating the Attorney General opinion as binding law. It is advisory, but it shapes how lenders underwrite.
- Using a page that shows an older cap. Check the date.
Key Terms Defined
Homestead: the home you live in as your Texas principal residence, which gets special legal protection under the state constitution.
Section 50(a)(6) loan: a Texas home equity loan, which is the legal category for a cash-out against a homestead.
VA funding fee: a one-time charge on a VA loan that you can finance, and that exempt veterans do not pay.
Flat charge: the single lender charge, capped at one percent of the loan, that must cover the lender’s own overhead on a VA loan.
Residual income: the money left each month after debts and basic living costs, and the controlling test on a VA file.
IRRRL: a VA streamline refinance of an existing VA loan that takes no cash out.
Frequently Asked Questions
Can a Texas veteran get a VA cash-out refinance on a homestead?
Generally no. The Texas Attorney General’s opinion reads the VA guaranty as extra collateral that a homestead equity loan cannot carry. Lenders underwrite to that reading, so these loans are not originated. Some web pages say otherwise, but the official source points the other way.
What fee limit applies to a Texas home equity loan?
Two percent of the original principal on required lender-side fees, not counting interest. Third-party appraisal, a licensed survey and the state base title premium sit outside it. Older pages may show a higher prior cap.
Is the VA funding fee waived for disabled veterans?
Yes, for veterans receiving compensation for a service-connected disability, along with the other exempt groups. Everyone else pays it. On a cash-out refinance the figures are 2.15% for first use and 3.3% for later use, and the fee can be financed.
Does the Texas rule cap my total closing costs at two percent?
No. It caps required lender-side fees. Appraisal, survey and title charges sit outside it, so the total at the table can run higher without any violation. Check your Closing Disclosure line by line.
Is an IRRRL a way to get cash out?
No. It replaces an existing VA loan to change the rate or move from adjustable to fixed. It takes no cash out and needs a net tangible benefit. Veterans who want cash from a Texas homestead look at a conventional Texas equity loan instead.
What to Do Next
Start with the goal. If you need cash from your Texas home, the conventional equity route is the realistic one. If you want a better loan without taking cash out, a VA streamline or non-cash VA refinance may fit. Lendmire’s article VA Cash-Out Rules for a Texas Homestead With the Fee Included goes deeper on how the pieces fit.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit. Every program figure here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.
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.
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.
For the program’s current guidelines, see VA loan programs.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. VA Lenders Handbook, Chapter 8 (VA Knowva copy)
3. VA.gov: Funding fee and closing costs
4. Texas Attorney General Opinion KP-0183
5. Texas Administrative Code, Title 7, §153.5
6. Texas Section 50(a)(6) eligibility rules
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 You Use a VA Cash-Out on a Texas Homestead After a PCS? · How Much a VA Cash-Out Lends on a Texas Homestead · VA Cash-Out vs Conventional Cash-Out When Texas Homestead Rules Apply
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.