The Quick Read: The size of a VA cash-out is set by equity and by the payment you can carry, but on a Texas homestead the state’s own rules come first. The sections below walk through how VA sizing works nationally, where Texas stops it, and which VA paths remain open.
This article is written for veterans, service members and spouses who own a home in Texas and are thinking about pulling equity out. It also helps anyone advising them. Start with the sizing mechanics, because they explain why the Texas answer matters.
What You Need to Know First
- VA cash-out sizing has two limits: how much equity the home holds, and how much payment your income can support after living costs.
- Nationally, the VA cash-out can reach 100% of the appraised value, including the financed funding fee. A Texas homestead sits under a lower state limit that cannot be waived.
- Texas’s attorney general concluded that a VA guaranty counts as extra collateral, which the homestead cash-out rules do not allow.
- A traditional VA purchase loan or a no-cash-out VA refinance is a different story. Those paths exist for Texas homesteads.
- Nothing here is a commitment to lend. Every figure is subject to lender guidelines and full file review.
How Does a VA Cash-Out Work Outside Texas?
A VA cash-out refinance replaces your current mortgage with a new VA-guaranteed loan and lets you take some equity as cash. It can also move a non-VA loan into a VA loan. You need a certificate of eligibility, you must meet the lender’s credit and income standards, and you must live in the home. VA’s cash-out loan page lays out those basics.
Here is the envelope I see across the wholesale programs Lendmire places VA files with. Financing can reach 100% of the appraised value, including the financed funding fee. There is no mortgage insurance. With full entitlement there is no VA loan limit. The wholesale programs start at a 580 decision score. VA itself sets no minimum score, so lenders add their own floors. Lendmire’s VA cash-out refinance program page covers the national program in more detail.
Two loan types matter for sizing. VA Circular 26-19-05 defines them by loan size. A Type I refinance keeps the new loan, funding fee included, at or below the payoff of the loan being refinanced. A Type II refinance exceeds the payoff, and that excess is your cash.
How Is a VA Cash-Out Sized, Step by Step?
Sizing runs as a chain. Each step shrinks the number before the next one.
1. Appraised value. A VA appraiser sets the reasonable value. Everything else hangs on it.
2. The leverage ceiling. Nationally, the total new loan, funding fee included, cannot exceed the appraised value.
3. Subtract your payoff. The balance you owe on the current loan comes off the top.
4. Subtract the funding fee. The fee is financed into the loan unless you are exempt, so it eats room under the ceiling.
5. Subtract closing costs. What is financed or paid at closing reduces the check.
6. What is left is your gross cash. Then the payment test decides whether you can carry it.
The funding fee follows a set schedule. For a cash-out refinance it is 2.15% on first use of the benefit and 3.3% after first use. VA’s funding fee page lists the tiers. Veterans receiving compensation for a service-connected disability, and the other exempt groups, do not pay it. A first-time user and a repeat user can therefore take noticeably different cash from the same home.
The Benefit Test
A VA cash-out also has to help you in a defined way. The Exhibit A comparison certification requires at least one of eight net tangible benefits. Examples include dropping monthly mortgage insurance, shortening the term, or lowering the payment. A refinance that only raises your balance, with no qualifying benefit, does not meet the test. Across the programs we place with, a cash-out carries the same seasoning as an IRRRL and the same benefit requirement.
Why Does the Payment Decide the File?
On VA loans, residual income is the controlling test. It is the money left each month after taxes, debts, housing costs and utilities, measured against a VA table that varies with family size and region. A bigger loan means a bigger payment, and a bigger payment shrinks residual income.
The 41% debt-to-income figure is a guideline, not a cap. A file above it can still work, but it needs residual income well above the table. Many veterans assume the opposite: that a ratio under 41% settles things. It does not. A low ratio with thin residual income can stall a file just as easily.
This makes cash-out sizing a payment question as much as an equity question. Say you have plenty of equity but your budget is already tight. The right cash-out may be far below the maximum. Say instead you are replacing a loan with a long remaining term. A new loan can restart the clock, so the payment may fall even as the balance rises.
A VA cash-out also changes your entitlement picture. If you use the benefit again, a later loan may land in the higher funding fee tier. Factor that in before you take cash you do not need.
Where Texas Stops the Math
Here is the catch. VA’s national ceiling is not the only limit on a Texas homestead. Texas treats equity loans on a primary residence under a special constitutional section, commonly called Section 50(a)(6). It sets a combined-lien cap well below VA’s 100%, and that cap counts the new loan plus every other lien on the home. It also requires a waiting period after application and a formal notice, a signed acknowledgment of the home’s value at closing, and a right to cancel after signing. Those details are in the Texas Constitution’s text as published on FindLaw. Lenders also face a statutory cap on fees.
The conflict is not just about the number. The Texas Attorney General’s Opinion KP-0183 concluded that the VA guaranty counts as collateral other than the homestead. The homestead equity rules allow only the homestead as security. On that reasoning, the opinion says the Texas Constitution prohibits a VA cash-out refinance on a homestead. The state’s savings and mortgage regulator had already told the requester that veterans with VA loans cannot get a cash-out refinance in Texas.
Two points of honesty belong here. First, an attorney general’s opinion is an interpretation, not a statute. Second, some lender and blog pages online say a Texas VA cash-out is allowed up to a lower cap, but that claim does not appear to rest on a primary source, and nothing cited here withdraws the opinion. A compliance officer or attorney should confirm the current position before you rely on either view. Treat “possible if you stay under the cap” as unproven, because the opinion’s reasoning concerns the guaranty as extra collateral, not just the loan-to-value figure.
That is why I will not walk you through a Texas VA cash-out with a promised number. The sizing chain above still teaches you how VA loans are built. In Texas, the state’s rules decide whether that chain applies to your home.
What Still Works for a Texas Homestead?
The same opinion notes that the equity loan section does not apply to a traditional VA purchase loan or a VA refinance loan. So several VA paths stay open. Here is how they compare.
| Option | Pulls out cash? | Payment effect | Texas fit |
|---|---|---|---|
| VA purchase loan | No | New loan on a new home | Works on a homestead |
| VA IRRRL | No | Can lower payment or fix an adjustable loan | Works if you have a VA loan |
| No-cash-out VA refinance | No | Depends on term and balance | Special conditions if leaving an equity loan |
| Texas home equity loan | Yes | Adds a new payment | Not VA; state rules apply |
The IRRRL, short for interest rate reduction refinance loan, refinances an existing VA loan to a lower rate or from adjustable to fixed. It needs no VA appraisal, carries a 0.5% funding fee unless you are exempt, and requires a net tangible benefit. Seasoning is the later of 210 days from your first payment and your sixth payment.
If you already hold a Texas equity loan, the constitution allows a refinance into an ordinary non-equity loan under conditions. You cannot take extra cash beyond paying off the debt and costs, and the combined-lien limit still applies. You also give up protections the equity loan carried, such as court-ordered foreclosure.
If you truly need cash, a Texas home equity loan is a separate conventional route. It follows the same state rules above. It does not carry VA’s no-mortgage-insurance treatment, and the cash it reaches is capped by the state’s limit, not VA’s. For the general sizing approach, Lendmire’s guide How to Size a Cash-Out Refinance Around Its Use and Your New Payment works the logic without a VA overlay.
Edge Cases Where the Rule Bends
- A financed funding fee. The fee counts toward the total loan for VA’s 100% test, and it also counts when a state fee cap is analyzed. Texas fee limits are part of why the opinion’s requester saw a conflict.
- A rental or second home. VA requires you to live in the home, so a VA cash-out is not for a property you do not occupy. Occupancy decides the leverage.
- Stacked liens. Because the Texas test is combined, a second lien or home equity line counts against the cap just as the first mortgage does.
- Spouse and non-borrowing owner. Texas has signature and closing requirements tied to the homestead. A spouse not on the loan can still have to sign. Ask the lender early.
- Seasoning on a Type I refinance. A Type I VA refinance can add tests such as a recoupment period, which measures how long the savings take to repay the costs. The circular spells them out.
What Does the Decision Look Like in Practice?
Picture a Texas veteran with a VA loan, a growing family and a roof that needs replacing. The first instinct is a VA cash-out. The better first question is whether the homestead rules allow it. If a lender confirms they do not, the choice narrows to a no-cash-out refinance, a Texas equity loan, or paying for the roof another way.
Now picture a veteran considering a move. A VA purchase loan on a new home sidesteps the cash-out question entirely. Equity from the old home can become a down payment, or the old loan can stay in place under the rules that apply.
A short checklist helps before you talk to anyone:
- Your certificate of eligibility and whether you have used the benefit before.
- Whether you are exempt from the funding fee.
- Your current loan type, balance, payoff and any second lien.
- Your monthly budget, so you know what payment you can carry.
- The question to ask each lender: “Do you place a VA cash-out on a Texas homestead, and what is your compliance position?”
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Homestead: the home you live in as your primary residence, which Texas protects with special rules on liens and foreclosure.
Residual income: the money left each month after taxes, debts, housing costs and utilities, tested against a VA table.
Funding fee: a one-time VA charge that can be financed into the loan and is waived for exempt veterans.
Entitlement: the part of your VA benefit that backs the lender’s loan and affects later funding fee tiers.
Net tangible benefit: a defined improvement, such as a lower payment or shorter term, that a VA refinance must deliver.
Seasoning: the waiting period between your first payments and the date you can refinance.
Frequently Asked Questions
Can a veteran get a VA cash-out refinance on a Texas homestead?
Texas’ attorney general concluded that the Texas Constitution prohibits it, because the VA guaranty counts as extra collateral. Ask any lender for its written position before you plan around it.
Does Texas ban all VA refinancing?
No. The opinion’s footnote says the equity loan section does not apply to a traditional VA purchase or refinance loan. An IRRRL on an existing VA loan and a no-cash-out refinance remain available, subject to lender guidelines and file review.
How does the funding fee change my cash-out?
On a national VA cash-out, the fee is 2.15% on first use and 3.3% after first use, unless you are exempt. When it is financed, it counts toward the 100% ceiling and reduces your cash. Repeat users therefore see less cash from the same equity.
Is 41% debt-to-income a hard limit on VA loans?
No. It is a guideline. Files above it need residual income well above the VA table. Residual income is the controlling test.
What if I already have a Texas home equity loan?
The constitution allows a refinance of an equity loan into a non-equity loan under conditions. You cannot take additional cash beyond debts and costs, and you lose some equity loan protections. Confirm the conditions with a lender before you commit.
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 — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. VA — Cash-out refinance loan
4. VA Circular 26-19-05 Exhibit A
5. Texas Constitution’s text as published on FindLaw
6. Texas Attorney General Opinion KP-0183
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: How Much More the Largest VA Cash-Out Releases Than Conventional · VA Cash-Out Requirements in Texas When the Fee Is Included in the Cap · How Much Payment a VA Cash-Out Frees for a Disability-Rated Veteran
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.