The Quick Read: The VA cash-out refinance has a national set of rules, and Texas adds a state layer on top that can change the answer. On the VA side, the loan can reach 100% of the appraised value, with no mortgage insurance. On the Texas side, the state’s Attorney General has concluded that a VA cash-out refinance on a homestead is not permitted. Anyone in Texas should confirm the current status with a lender and a Texas title attorney before building a plan around it.
Key Takeaways
- The VA program is built to reach 100% of appraised value on a cash-out, including the financed funding fee, subject to lender guidelines and full file review.
- Texas treats cash-out loans on a homestead differently from almost every other state. That is a state-law issue, not a closing-cost schedule.
- “High-cost closing state” is shorthand you will see online. It is not an official category, and this article does not rank Texas against other states on closing costs.
- A VA refinance that takes no cash out follows a different path in Texas than a cash-out does.
- Residual income, not a single ratio, is the test that decides most VA files.
What Does “High-Cost Closing State” Actually Mean?
It is a loose label, not a rule. People use it for states where title, recording and attorney-related charges tend to push closing costs up. No federal or VA rule defines it.
Here is the honest picture for Texas. The thing that reshapes a VA cash-out there is the Texas Constitution, not a fee table. Closing costs matter in every state, and VA itself warns that closing costs on a cash-out can add up to thousands of dollars. Your actual costs depend on the property, the title work and the loan structure.
So the useful question is not “how high are Texas closings?” It is “what does Texas change about the VA cash-out, and what stays the same?” The rest of this article answers that.
What Is a VA Cash-Out Refinance?
A VA cash-out refinance replaces your current mortgage with a new VA-backed loan. The new balance can be larger than the old one, and you receive the difference as cash. Lendmire’s VA cash-out refinance program page covers the product in detail.
Three features set it apart from other cash-out options:
- Leverage. Across the wholesale programs Lendmire places VA files with, the cash-out reaches 100% of the appraised value, including the financed funding fee. Most conventional cash-out loans stop well short of that.
- No mortgage insurance. The VA guaranty replaces it. There is a funding fee instead, covered below.
- Any loan type in. The loan you pay off does not have to be a VA loan. A conventional or FHA mortgage can be refinanced into VA this way, according to VA.
VA is not the lender. Private lenders make the loans and VA guarantees a portion. Lendmire is a mortgage broker, so it arranges the loan through wholesale lenders and does not lend the money itself.
How Is a VA Cash-Out Underwritten, Step by Step?
The loan moves through the same sequence in every state. Here is the order a file follows.
1. Eligibility. You need a Certificate of Eligibility (COE), the VA document that confirms your service qualifies. VA decides eligibility, not the lender. You must also live in the home you are refinancing.
2. Credit and income review. Unlike the VA’s streamlined refinance, a cash-out needs a full credit check and underwriting. VA sets no minimum credit score. The wholesale programs Lendmire works with start at a 580 decision score, and some lenders set a higher floor.
3. Residual income. This is the controlling test. Residual income is the money left each month after the mortgage, taxes, other debts and basic living costs. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the VA table.
4. Appraisal. A VA appraisal sets the “reasonable value” of the home. That value is the base for the loan-to-value test, so the appraisal drives how much cash you can reach.
5. Net tangible benefit. The loan must give you a real, identifiable benefit. Taking cash out can count, along with other changes VA recognizes.
6. Seasoning, if you are paying off a VA loan. Seasoning is the waiting period between loans. For a VA-to-VA refinance, it is the later of 210 days from your first payment and your sixth payment. A non-VA loan has no VA seasoning clock, though lenders may add their own rules.
7. Compliance disclosures. VA’s lender guidance says a guaranty is not allowed until the required cash-out disclosures are uploaded. You will see these as paperwork in the file.
8. Closing report. You sign a statement showing the cash paid to you and the debts paid from the proceeds.
VA publishes its lender guidance, including the appraisal and refinancing rules, through its VA home loan program site. The cash-out rules were rewritten after a change in federal law, so lenders work from the current version.
How Does the VA Funding Fee Work?
The funding fee is a one-time charge that takes the place of monthly mortgage insurance. It can be financed, which means you can roll it into the loan. It is waived for veterans receiving compensation for a service-connected disability and for the other exempt groups.
For a cash-out refinance, the fee is 2.15% on first use and 3.3% on later use. Those two figures are the program’s cash-out tiers. The lower tiers you may have seen, such as 1.25% or 1.5%, depend on a down payment, and a cash-out has no down payment to measure.
Two practical points follow. The fee is a percentage of the loan, so it does not shrink as your equity grows. And because it can be financed, it counts inside that 100% ceiling. That is why the cash you actually receive is smaller than the gap between your old balance and the appraised value.
Where Does Texas Change the Picture?
Texas changes the answer at the homestead. The Texas Constitution treats cash-out loans on a primary residence as a special category, often called a 50(a)(6) loan after the section of Article XVI that governs it. Those loans carry their own limits.
The key question is whether a VA cash-out belongs in that category. The most authoritative source is the Texas Attorney General. In Opinion KP-0183, the office concluded that the VA guaranty counts as “additional collateral,” which the constitution forbids for these loans. The opinion therefore concluded that the Texas Constitution prohibits a VA cash-out refinance loan on a homestead.
The same opinion draws a line the other way. Section 50(a)(6) governs home equity loans. It does not apply to a traditional VA purchase loan or to a VA refinance that takes no cash out.
Some online pages disagree with all of this. A few say VA cash-out is flatly banned in Texas. Others say it is allowed but capped at 80%. Others say it is “not a 50(a)(6) loan when structured correctly.” This is a legitimate area of conflicting claims, and the Attorney General opinion supports the “prohibited on a homestead” reading. Because the rules can change, confirm current status with your lender and a Texas title attorney.
What Are the Texas Homestead Rules That Apply to Other Cash-Out Loans?
If you pursue a conventional Texas cash-out instead, the constitution sets the guardrails. Here is how those guardrails compare with the VA program’s envelope.
| Factor | VA cash-out (program) | Texas 50(a)(6) cash-out |
|---|---|---|
| Max leverage | 100% of appraised value | 80% of fair market value |
| Mortgage insurance | None | Depends on the loan |
| Waiting period | Seasoning on VA-to-VA | Wait before closing |
| Other liens | Any loan type refinanced | One such loan at a time |
The 80% figure comes from the Texas Constitution, Article XVI, Section 50, which limits total debt secured by the homestead to 80% of fair market value. The state’s official home equity notice also says only one such loan may be secured by your home at a time, and that the loan may not close until a set waiting period has passed after you apply.
The leverage gap is the big one. At 100% under the VA program versus 80% under Texas rules, the cash a homeowner can reach differs sharply. That is why the legal status of a VA cash-out on a Texas homestead is not a footnote.
What Are the Edge Cases?
The general rule breaks in a handful of named situations. These are the ones that come up most.
A VA refinance with no cash out. If you only want a lower rate or a different term, the Texas homestead concern in the Attorney General opinion does not apply. The opinion distinguishes it as not a 50(a)(6) loan. The VA streamlined refinance (the IRRRL) is the usual route for a VA-to-VA swap. It needs no VA appraisal, carries a 0.5% fee unless you are exempt, and requires a net tangible benefit. It cannot take equity out. The one exception is reimbursement for energy-efficiency improvements.
An existing Texas equity loan. If you already hold a Texas home equity lien, the “one at a time” rule comes into play, and you may face a waiting period before another. A prior equity lien can complicate any new loan secured by the same homestead.
Non-VA loan into VA. Outside Texas homestead rules, this is allowed. The cash-out can refinance a conventional or FHA loan into a VA-backed one.
Exempt veterans. If your disability compensation makes you exempt, the funding fee is waived.
Property type. VA loans are for a home you live in. A spouse or dependent can satisfy occupancy for an active-duty borrower. A rental property does not qualify, because occupancy decides the leverage.
Holding more than one lien. Some Texas owners wonder whether a home equity line and a cash-out lien can sit on the same property. Lendmire’s piece Can a High-Closing-Cost Texas Owner Hold a HELOC and Cash-Out Lien? walks through that question.
What Are the Alternatives If a VA Cash-Out Is Off the Table?
If the Texas rule blocks a VA cash-out on your homestead, you still have options. Each trades something.
| Option | Cash access | Main constraint |
|---|---|---|
| VA IRRRL | No equity out | VA-to-VA only |
| Texas 50(a)(6) cash-out | Up to 80% of value | State homestead limits |
| Second-lien equity loan | Based on equity | Adds a second payment |
| Keep the current loan | None | No change in terms |
A conventional Texas cash-out gives up the 100% reach and the no-mortgage-insurance feature. A second-lien equity loan lets you keep a low first-mortgage balance but adds a second payment. Neither is “better.” The right one depends on what you are trying to do with the cash and what your current loan is worth keeping.
Think it through out loud. If your current VA loan has terms you value, a second lien might preserve them while still funding a project. If you want to consolidate debt and the current terms are no longer a benefit, replacing the first mortgage may make more sense. Honestly, this is a genuine toss-up that turns on your own numbers.
What Should You Compare Before Deciding?
A cash-out refinance replaces the loan you have, so the first thing you give up is the old terms. Weigh these four things.
1. What you are giving up. The new balance includes the cash taken plus any financed fees. Your old loan’s terms are gone.
2. The cushion. Borrowing more reduces your equity. Texas requires a cushion of at least 20% on its homestead cash-out loans.
3. The full cost. The rate is not the whole picture. Compare the Loan Estimate and the closing costs line by line. VA’s own guidance points borrowers to the CFPB’s Owning a Home resources for this.
4. The offer itself. Be wary of refinance pitches that promise skipped payments or big escrow refunds. CFPB and VA have warned that such offers can be misleading, and that escrow refunds can be far smaller than promised.
A practitioner note. Files that run into trouble in Texas usually do so early, when the plan assumes the national VA envelope applies to a homestead without checking. The cleanest files start with the legal question, then the equity, then the loan. Getting the order right saves a restart.
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
Certificate of Eligibility (COE): The VA document that confirms your service qualifies you for a VA loan.
Residual income: The money left each month after the mortgage, debts and living costs, and the controlling test on VA files.
Seasoning: The waiting period required between one loan and the next.
Net tangible benefit: A real, identifiable improvement to your position that the VA requires a refinance to deliver.
Funding fee: A one-time VA charge that replaces monthly mortgage insurance.
50(a)(6) loan: A Texas home equity loan on a primary residence, named for the section of the Texas Constitution that governs it.
Homestead: Your primary residence, which Texas law protects with special lending limits.
Frequently Asked Questions
Can I do a VA cash-out refinance on my Texas home?
Not on a homestead, according to the Texas Attorney General’s opinion on the question. The opinion concluded that the VA guaranty is additional collateral the constitution prohibits. A VA refinance that takes no cash out is treated differently. Confirm the current status with a lender and a Texas title attorney before moving forward.
Does the VA 100% limit apply in Texas?
The 100% figure is the VA program’s reach. In Texas, the state’s 80% homestead limit applies to loans in the 50(a)(6) category, so the two do not combine. Which one governs depends on how the loan is classified. That classification is the central question in Texas.
How much cash would I actually receive?
Less than the gap between your old balance and the appraised value. The new loan has to cover your payoff, any financed funding fee and closing costs. The funding fee for a cash-out is 2.15% on first use and 3.3% on later use, unless you are exempt. Subject to lender guidelines and full file review.
What credit score do I need?
VA sets no minimum. The wholesale programs Lendmire places VA loans with start at a 580 decision score. Some lenders set a higher floor. Residual income and your overall file carry more weight than the score alone.
Is a VA streamlined refinance available in Texas?
Yes, when you are refinancing an existing VA loan and taking no equity out. It needs a net tangible benefit, a 0.5% fee unless exempt, and seasoning of the later of 210 days from your first payment and your sixth payment. It involves no VA appraisal.
Where Does This Leave You?
Start with the legal question, not the loan. If your home is a Texas homestead, the plan has to survive the state rule before the VA numbers matter. If your goal is a lower rate or a different term on an existing VA loan, the path is simpler.
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 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. VA – Cash-out refinance loan
3. Texas Attorney General Opinion KP-0183
4. Texas Constitution, Article XVI, Section 50
5. CFPB and VA warning on 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 Cash-Out Refinance Timeline From COE to Rescission · How Much a VA Cash-Out Lends on a Texas Homestead · VA Cash-Out Rules for a Texas Homestead With the Fee Included
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.