The Quick Read: Timing a VA cash-out depends on three things: whether you have VA entitlement, how much equity the appraisal supports, and, if you are leaving FHA, whether you are inside the first three years of that loan. VA sets no waiting period on a non-VA loan, but the lender receiving the file may add its own. The cost of leaving FHA early is a lost premium credit, not a penalty.
What Is a VA Cash-Out Refinance, and Who Can Use It?
A VA cash-out refinance replaces your current mortgage with a new VA-backed loan. VA.gov says you can use it to take cash from your equity or to move a non-VA loan into a VA loan. Both a conventional mortgage and an FHA mortgage qualify as the loan being replaced.
VA lists three conditions, and all must be true:
- You qualify for a Certificate of Eligibility (COE), the VA document that proves your service entitlement.
- You meet VA’s and the lender’s credit and income standards.
- You will live in the home you are refinancing.
That last one matters. VA cash-out is for a home you occupy. It is not a tool for a second home or a rental.
Lendmire is a mortgage broker, so it arranges these loans through wholesale lenders and never lends directly. Everything here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Is There a Waiting Period When You Leave a Conventional or FHA Loan?
Generally, VA itself sets no waiting period on a conventional or FHA loan you are paying off. The well-known “210 days and six payments” test belongs to refinancing an existing VA loan. Some pages online blur that line, which is why so many borrowers think they must wait.
Here is the catch. The investor buying the new loan, or the lender handling your file, can add its own timing requirement. Those are lender overlays (a lender’s own rules on top of VA’s), not VA rules. Because overlays vary from one lender and investor to the next, confirm the requirement with the specific lender rather than assuming a waiting period applies or doesn’t.
Ask the loan officer one plain question before you plan around a date: “Does your investor require any seasoning on my current loan?” Get the answer in writing. Do not budget around a waiting period you heard secondhand.
When Does It Make Sense to Go, and When Should You Wait?
Go when the appraisal supports the cash you want, your credit and income hold up, and your current loan is costing you more than the VA structure will. Wait when something on the old loan is about to change in your favor, or when leaving costs you a credit you cannot get back.
| Situation | Signal | Usual move |
|---|---|---|
| FHA loan under 3 years old | Premium credit still exists | Weigh the lost credit first |
| FHA loan past year three | Credit already expired | Timing penalty gone |
| Conventional loan with monthly mortgage insurance | You pay it every month | VA has none, so leaving can help |
| Very little equity | Appraisal near your payoff | Cash-out may not work |
| Entitlement not yet confirmed | No COE in hand | Get the COE first |
| Late payment in the pipeline | Payment due mid-process | Pay on time, always |
Run that table against your own file. If two rows apply, the order you handle them in matters more than the date.
Leaving FHA: What Happens to Your Upfront Premium?
If you leave FHA for VA, you do not get the upfront premium back. The FHA upfront premium is the 1.75% charge added to the base loan at closing.
HUD’s FHA Homeowners Fact Sheet explains the credit. It applies only when you refinance into a new FHA-insured loan. For loans endorsed on or after December 8, 2004, no refund is due after the third year of insurance.
So the credit is not cash in your pocket. It is a discount against the next FHA premium, and only an FHA-to-FHA move uses it. That creates the central trade-off:
- Inside three years: leaving for VA forfeits a credit you would have kept by staying in FHA.
- Past three years: the credit is gone either way, so that reason to wait disappears.
Staying has a cost too. FHA charges an annual premium, which on a thirty-year loan above 90% LTV lasts for the full term. At or below 90% LTV it ends after eleven years. If your balance and the loan’s age put you near that line, the annual premium schedule is part of your decision. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
HUD’s own audit work confirms refunds cover only the unearned part of the upfront premium. The schedule has also changed over the years through Mortgagee Letters, so use your loan’s actual endorsement date, not a rule of thumb.
Wait or go is a household calculation. Compare the lost credit and the VA funding fee against the monthly cost you stop paying.
Leaving a Conventional Loan: What Changes at Payoff?
Leaving a conventional loan usually comes down to private mortgage insurance. VA has no monthly mortgage insurance. VA’s funding fee page says so directly. If you carry PMI today, a VA payoff ends that recurring cost.
Removing mortgage insurance can also help the new loan meet VA’s net tangible benefit test, covered below.
The questions to ask before you move:
1. How close is your current loan to dropping PMI on its own?
2. How much of your equity would the new loan use?
3. Is the funding fee, once financed, worth the monthly relief?
If PMI is about to end anyway, waiting may beat leaving. If it is years away, leaving earlier can pay off.
How Does VA Underwrite a Cash-Out Step by Step?
A VA cash-out is a full underwriting file, not a streamline. The steps run in a fixed order.
1. Confirm eligibility. You get a COE and confirm entitlement, and you certify you will occupy the home.
2. Pick the type. VA Circular 26-19-05 defines Type I and Type II cash-outs. Type I stays at or below the payoff of the old loan, funding fee included. Type II goes above it, which is how you take cash.
3. Full underwriting. Expect a full appraisal, credit review and income analysis, including residual income (what is left after major obligations) and debt-to-income ratio.
4. Appraisal sets the ceiling. VA caps the loan at 100% of reasonable value, with the funding fee counted in. A financed fee cannot push you past it.
5. Net tangible benefit. The loan must show a real benefit under VA’s tests. One test is a new loan at or below 90% LTV. Another is paying off an interim construction loan. VA has other tests, so ask your loan officer which one your file uses.
6. Funding fee. This is a one-time VA charge. It can generally be rolled into the loan, subject to the cap. It is waived for people receiving VA disability compensation and certain others.
7. Closing. The new loan pays off the old one and must sit in first-lien position. If the total would exceed the cap, you bring cash.
Cash-out percentages for the funding fee change by use, with a lower first-use fee and a higher repeat-use fee. Read the current chart on VA’s page rather than trusting a number from memory.
Where Do the Usual Rules Break?
Several edge cases catch borrowers off guard.
No lien, no VA cash-out. A paid-off home is not eligible for a VA-guaranteed refinance, since VA refinances replace an existing loan.
Occupancy is not optional. You must live there. If the home is a rental or second home, VA cash-out is the wrong tool.
A cap under the cap. VA allows up to 100% of value. Many lenders stop lower. That is an overlay, not a VA rule, so a lender’s limit does not mean you misread the program.
Equity cushion. Borrowing near 100% of value leaves almost no margin. If prices dip, you could owe more than the home is worth.
Disability rating changes. A new or changed rating can alter your funding fee status. Timing the refinance after a rating decision may change what you pay.
FHA streamline as a contrast. An FHA streamline is a different path. It refinances an existing FHA loan with no appraisal and a limited credit review, but the annual premium continues. Staying in the FHA family keeps the premium credit alive. Leaving ends it.
Cash back on conversion. Some pages say you cannot take cash while converting a non-VA loan. VA’s own page describes cash-out as available for equity or for a non-VA conversion. Ask your loan officer how the lender handles both at once.
What Does This Decision Look Like in Practice?
Picture a homeowner two years into an FHA loan. She has a COE, a paid-on-time history, and equity she wants for debt payoff. She also pays FHA’s annual premium every month.
Her timing question has three parts:
- Leaving now forfeits the premium credit, since she is inside year three.
- Waiting past year three removes that cost but adds months of annual premium.
- Her appraisal decides how much cash is even possible.
Now picture a conventional borrower four years in, paying PMI, with a lender that wants nothing more than a clean payment history. He has no credit to lose. His decision is simpler: does ending PMI plus the funding fee beat his current setup?
Both borrowers should compare the old payment and insurance against the new payment, funding fee and cash taken. That comparison is your break-even. Do it with real figures from your Loan Estimate, not a general estimate. VA also warns that refinance closing costs can add up to thousands of dollars, so count them.
One honest toss-up: if the premium credit is the only thing holding you back, the answer is often to wait. If monthly insurance is the bigger drag, going sooner can win.
If you would rather keep the first mortgage, there is also Lendmire’s piece VA Cash-Out vs HELOC for Debt When the First Mortgage Is Worth Keeping.
What If You Stay in FHA Instead?
Staying in FHA is a real option, and it has its own limits. Across the wholesale programs I place files with, the FHA cash-out refinance program reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. County loan limits apply. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
The FHA rate-and-term refinance, which takes no cash, reaches 97.75% on a principal residence you have occupied for the previous twelve months. Ratios run from 31/43 up to 40/50 with documented compensating factors, and most files are decided by the automated finding. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review.
Compare that to VA’s 100% ceiling and no monthly mortgage insurance. VA gives a veteran more room. FHA keeps the premium credit alive and does not need entitlement. Neither is better in the abstract.
Key Terms Defined
Certificate of Eligibility (COE): The VA document that confirms you have entitlement to a VA-backed loan.
Type I cash-out: A VA refinance where the total, funding fee included, does not exceed the payoff of the loan being replaced.
Type II cash-out: A VA refinance where the total, funding fee included, is more than the payoff, so you receive cash.
Net tangible benefit: VA’s requirement that a cash-out refinance show a real, measurable advantage to the borrower.
Funding fee: A one-time VA charge, often financed into the loan, and waived for some borrowers.
Seasoning: The waiting period a lender or investor wants before you refinance.
Upfront mortgage insurance premium: The FHA charge added at closing. Its refund credit applies only to an FHA-to-FHA refinance.
Frequently Asked Questions
Can I do a VA cash-out if my current loan is conventional or FHA?
Yes. VA describes cash-out as a way to take equity or move a non-VA loan into a VA loan. You still need a COE, acceptable credit and income, and a home you will live in. Lender guidelines decide the rest.
Do I have to wait 210 days before leaving an FHA or conventional loan?
Generally not by VA rule. That test applies to refinancing an existing VA loan. A lender or investor can still add its own timing requirement, so confirm with your loan officer before you plan around a date.
Will I get my FHA upfront premium back if I move to VA?
No. HUD treats it as a credit that applies only to a new FHA loan, and only within the first three years for loans endorsed on or after December 8, 2004. Moving to VA gets you nothing back.
Does VA let me borrow more than the home is worth?
No. VA caps the loan at 100% of reasonable value, funding fee included. Many lenders set a lower limit of their own. That is an overlay, not a VA rule.
Can I use a VA cash-out on a rental or second home?
No. Occupancy decides it. VA requires you to live in the home you are refinancing.
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. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. VA.gov – Cash-out refinance loan
2. HUD – FHA Homeowners Fact Sheet
3. VA.gov – Funding fee and closing costs
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Conventional Cash-Out vs FHA Cash-Out for a Current FHA Homeowner · FHA and Conventional Cash-Out Requirements Side by Side for a Primary Home · Can You Refinance Out of FHA With a Conventional Cash-Out Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.