The Quick Read: A veteran who has VA eligibility and a home to live in will usually reach more equity with a VA cash-out. FHA fits the borrower who can’t use VA, or who wants a simpler file with a clear 80% ceiling. The two loans differ most on equity access, mortgage insurance versus a funding fee, and who is allowed to apply. Every figure here is subject to lender guidelines and full file review.
- FHA cash-out tops out at 80% loan-to-value, open to any qualifying owner-occupant.
- VA cash-out needs a Certificate of Eligibility and generally allows more equity access, though many lenders set a lower cap of their own.
- FHA charges mortgage insurance. VA charges a one-time funding fee and no monthly mortgage insurance.
- A veteran with an existing FHA loan can often use a VA cash-out to replace it.
Side-by-Side
| Factor | FHA cash-out | VA cash-out |
|---|---|---|
| Maximum leverage | 80% of appraised value | Higher than FHA; lender caps often lower |
| Who can apply | Any qualifying owner-occupant | Veterans with a Certificate of Eligibility |
| Credit floor | 580 decision score on the network’s programs | Set by each lender’s own standards |
| Mortgage insurance | 1.75% upfront plus annual premium | No monthly MI; one-time funding fee |
| Occupancy | Principal residence, owned and lived in 12 months | Veteran must live in the home |
| Ratios | 31/43 base; up to 40/50 with documented factors | Lender’s credit and income standards |
| Existing loan | Any mortgage | Can refinance a non-VA loan into VA |
| Appraisal | Full appraisal required | VA appraisal sets “reasonable value” |
Two notes on that table. First, it separates program rules from lender overlays. A program rule is what the agency sets. An overlay is a tighter limit a lender adds on top. Quotes for the same veteran can differ because overlays differ.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
Second, FHA’s 80% cap is firm. The VA’s higher ceiling is not a promise of 100% to every borrower.
How Each Program Actually Works
Both loans do the same basic thing. A new mortgage pays off the old one, and you receive the difference as cash. The differences come from who backs the loan and what that backer requires.
FHA loans are insured by the federal government, and the borrower pays for that insurance. VA loans are guaranteed by the Department of Veterans Affairs. The lender still does the full underwriting. VA doesn’t underwrite the loan itself.
A veteran may qualify for both. Many veterans don’t realize that FHA is open to them even though they hold VA entitlement. That choice is the whole point of this comparison.
FHA Cash-Out Requirements in Plain Terms
Across the wholesale programs Lendmire places FHA files with, the pattern is consistent. Here is what the file has to show.
Leverage. The new loan can reach 80% of the home’s appraised value. HUD lowered the cash-out limit to 80% in a handbook update, down from the earlier 85%. The upfront premium can be financed, and it counts inside that cap. So the borrower should plan on leaving at least 20% equity in the home.
Credit. HUD’s own guidance ties eligibility to a minimum decision credit score. With several borrowers on the loan, the lowest score is the one that counts. The wholesale programs behind Lendmire’s FHA placements start at 580, and the network does not reach below that floor.
Occupancy. The home must be a principal residence. The borrower must have owned and lived in it for 12 months before the case number is assigned. Investment properties and second homes are out. The lender will also review the prior mortgage payment history.
Ratios. The base pair is 31/43, meaning housing cost and total debt as shares of income. Documented compensating factors can stretch that to 40/50 at the top tier. Most files run through an automated finding first, and that finding governs.
Mortgage insurance. The upfront premium is 1.75% of the base loan, and it can be financed. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90% LTV, it ends after eleven years. Since a cash-out tops out at 80%, the shorter schedule typically applies. County loan limits also apply, and they change every year.
VA Cash-Out Requirements in Plain Terms
VA’s cash-out page lists three basic requirements. You need a Certificate of Eligibility. You need to meet VA’s and the lender’s standards for credit and income. And you must live in the home being refinanced.
The same page notes a few things worth knowing. A VA cash-out can pull equity out of the home, and it can also refinance a non-VA loan into a VA loan. It also warns that closing costs can add up to thousands of dollars. That warning applies to FHA too.
Net tangible benefit. For a VA refinance, the lender has to document at least one benefit to the borrower. Examples include a lower payment, a shorter term, or moving from an adjustable to a fixed loan. Dropping FHA mortgage insurance can count as well.
Funding fee. VA charges a one-time funding fee instead of monthly mortgage insurance. It can usually be rolled into the loan, which raises the balance. Some veterans are exempt, including many with service-connected disabilities. Confirm the current fee schedule and your exemption status at va.gov or with your lender before you decide. The percentages change by use and by file type.
Seasoning. This one trips people up. VA seasoning rules apply to VA-to-VA refinances where no cash is taken out. Under VA Circular 26-18-13, seasoning applies when the new principal is less than the loan being refinanced, and doesn’t when the new principal is larger. Lenders may apply the guidance differently, so ask.
Lender overlays. Many lenders set a lower leverage cap and a higher credit floor than VA does. VA’s ceiling describes what’s allowed. It doesn’t describe what a given lender will offer.
When FHA Is the Better Fit
FHA tends to win in a few situations.
You have no VA eligibility. If you lack a Certificate of Eligibility, the comparison ends. FHA is open to any qualifying owner-occupant.
You want a modest cash-out and plenty of cushion. At 80% maximum leverage, FHA keeps meaningful equity in the home. That’s a feature when prices soften. Borrowing near full value leaves little room if values fall.
Your credit and ratios sit in the middle. FHA’s 580 floor and its 31/43 to 40/50 ratio range are clear. For a borrower whose file has documented compensating factors, that structure can be easier to read than a patchwork of lender overlays. A veteran with a thinner file may want to see how VA and FHA cash-out compare for a veteran with a thin credit profile.
You want one program to price against. Lendmire’s FHA cash-out refinance program runs through wholesale lenders under one set of program rules, which makes side-by-side comparison simpler.
Here’s the catch. FHA mortgage insurance is a cost that runs alongside the loan. The upfront premium is financed, and the annual premium continues for years. A veteran who values a lower ongoing cost may find VA a better match.
When VA Is the Better Fit
VA tends to win in these cases.
You want more equity access. VA’s ceiling is higher than FHA’s 80%. For a veteran who needs a larger cash amount, that gap can decide the whole question. Remember that a lender’s own cap may sit well below VA’s.
You want to avoid monthly mortgage insurance. VA has none. The funding fee is a one-time charge, and it can be financed. A veteran paying FHA mortgage insurance on an existing loan should look closely at that tradeoff.
You currently hold an FHA loan. A VA cash-out can refinance a non-VA loan into a VA loan. Seasoning applies to VA-to-VA refinances where no cash is taken, not to this conversion. That makes it a real path out of FHA mortgage insurance. Lendmire’s piece FHA Cash-Out vs VA Cash-Out for a Veteran With an Existing FHA Loan works through that decision in more depth.
You have strong credit and steady income. VA relies on lender standards for credit and income. A well-documented file may meet those standards with room to spare.
The tradeoff is that the funding fee raises the loan balance if you finance it. A larger balance with less retained equity means a thinner cushion. The decision isn’t only about cost. It’s also about how much risk you want if values fall.
A Quick Scenario
Picture a veteran who owns and lives in a home with a financed FHA loan. They want cash for a roof and a kitchen. Their score sits comfortably above 580, and they have VA entitlement.
On FHA, they’d borrow up to 80% of the appraised value and pay the 1.75% upfront premium, plus an annual premium that ends after eleven years at that leverage. On VA, they could borrow more, pay a funding fee instead of mortgage insurance, and exit FHA entirely.
If they need only a modest amount, the extra VA equity access doesn’t matter much. The question then turns on insurance versus funding fee. If they need a large amount, VA’s higher ceiling may be the only way to reach it. The better choice follows from how much cash they need and how long they plan to keep the loan.
Key Terms Defined
Certificate of Eligibility (COE): The document that proves a veteran’s service qualifies them for a VA loan.
Loan-to-value (LTV): The new loan balance divided by the home’s appraised value.
Net tangible benefit: A documented gain to the borrower that a VA refinance has to show, such as a lower payment or a shorter term.
Seasoning: A waiting period, or a minimum number of payments, before a loan can be refinanced.
Funding fee: VA’s one-time charge, which stands in for monthly mortgage insurance.
Lender overlay: A rule a lender adds that is stricter than the agency’s own minimum.
Common Mistakes
- Assuming VA means 100% for everyone. Lender overlays often cut the ceiling.
- Assuming FHA still allows 85%. It doesn’t. The cash-out cap is 80%.
- Treating HUD’s credit floor as the lender’s floor. Lenders usually set theirs higher than HUD’s minimum.
- Treating VA as free. The funding fee and closing costs both apply.
- Confusing the VA cash-out with the IRRRL. The IRRRL is the VA streamline, a different product for VA-to-VA refinances. It isn’t for taking cash.
Some states also limit cash-out leverage on the home you live in. Check your state’s rules with the lender before you plan around a number.
One more practical point. You’ll receive a Loan Estimate after you apply and a Closing Disclosure before closing, and the CFPB explains the timing. Compare the two line by line. Refinances also carry a three-day right to rescind.
A Balanced Verdict
Neither program wins across the board. VA usually offers more equity access and no monthly mortgage insurance, which suits eligible veterans who need a larger amount or want out of FHA insurance. FHA offers a clear 80% limit and open eligibility, which suits borrowers who can’t use VA, want a firm cushion, or take a smaller amount of cash.
A veteran with an existing FHA loan sits at the flip point. If the goal is to drop the insurance, VA deserves a hard look. If the goal is a small amount of cash and a stable payoff plan, FHA may be enough.
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. Call 828-256-2183 to talk it through.
Frequently Asked Questions
Can a veteran choose FHA even if they qualify for VA?
Yes. FHA is open to any qualifying owner-occupant, so VA eligibility doesn’t block it. The choice comes down to how much cash you need, how you feel about monthly mortgage insurance versus a funding fee, and how much equity you want to leave in the home.
Does a VA cash-out get rid of FHA mortgage insurance?
It can, because a VA cash-out is able to refinance a non-VA loan, which includes an FHA loan, into a VA loan. VA has no monthly mortgage insurance, but it charges a funding fee that you can often finance. Whether the swap helps depends on the file and on lender guidelines.
Do I have to take cash out of the home?
Not necessarily. VA defines two types of cash-out loans. In one, the new loan doesn’t exceed the payoff of the loan being refinanced. In the other, it does. Taking cash is the point of the FHA cash-out, though a different FHA product, the streamline, takes none.
Is the 80% FHA limit the same for every borrower?
Yes, the cash-out cap is 80% of appraised value. Credit tier doesn’t change it, and the financed upfront premium counts inside the cap. Lender guidelines may add their own limits on top.
Can I use either loan on a rental property or second home?
No. FHA requires a principal residence, and VA requires that you live in the home being refinanced. Occupancy decides the leverage, so these programs are for the home you live in.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Handbook 4000.1 Update transmittal
2. HUD answers: minimum credit score
3. VA cash-out refinance loan page
5. CFPB: documents received before closing
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Refinance Out of FHA Mortgage Insurance on a Low Appraisal · How Much an FHA Streamline Refinance Can Lower Your Payment · Refinance Requirements for Switching Into VA or Out of FHA
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.