The Quick Read: On a Texas homestead, the funding fee is a moot point, because a VA cash-out refinance generally isn’t written there. The Texas Attorney General concluded that the VA guaranty counts as prohibited additional collateral on an equity loan. Where a VA cash-out is available, the fee runs 2.15% on first use and 3.3% after that, and exempt veterans owe none. Everything below shows how the fee works and where the Texas rule breaks the usual path.
Key Takeaways
- The funding fee on a VA cash-out is 2.15% for first use and 3.3% for subsequent use, subject to lender guidelines.
- A Texas homestead is the named exception. Lenders in the state generally don’t write a VA cash-out there.
- A down payment doesn’t lower the fee on a refinance. First versus subsequent use sets the tier.
- Veterans receiving compensation for a service-connected disability are exempt. Check the Certificate of Eligibility first.
- The fee is one-time, paid to VA, and can be financed into the loan.
What Is the VA Funding Fee on a Cash-Out?
The funding fee is a one-time charge on a VA-backed loan, calculated as a percentage of the loan amount. VA explains that it offsets the cost to taxpayers, since the program has no down payment requirement and no monthly mortgage insurance. It applies when you buy, build, improve, repair, or refinance, unless you qualify for an exemption. You can pay it at closing or finance it into the loan.
It is not PMI. VA loans carry no monthly mortgage insurance of any kind. And the fee doesn’t go to the lender. The lender collects it at closing and remits it to VA.
Our program knowledge across the wholesale lenders Lendmire works with is consistent here. A VA cash-out can reach 100% of the appraised value, including the financed fee, and it refinances any loan type into VA. Seasoning and a net tangible benefit apply, subject to lender guidelines and full file review.
How Much Is the Fee, by Tier?
The tier on a cash-out turns on one question: is this your first use of the benefit or a later one?
| Use of benefit | Cash-out funding fee |
|---|---|
| First use | 2.15% |
| Subsequent use | 3.3% |
| Exempt veteran | None |
Compare that with the other VA tiers. On a purchase, a larger down payment lowers the fee: 1.5% with five to under ten percent down, 1.25% with ten percent or more. The IRRRL carries 0.5%. A cash-out has no down payment, so those lower purchase tiers don’t help here. Borrowers may expect a down-payment discount on a refinance. It doesn’t exist.
Why the Texas Homestead Is Different
Here is the catch. The title assumes a VA cash-out can be done on a Texas homestead. Generally, it can’t.
The Texas Constitution restricts equity loans on a homestead. In Opinion KP-0183, the Texas Attorney General concluded that a VA loan guaranty is additional collateral, which the constitution’s equity-loan provision forbids. The opinion also noted the state’s own regulatory view: a guaranty, or the obligation of a cosigner or surety, is additional collateral and isn’t permitted on an equity loan.
An attorney general opinion is advisory, not binding law. In practice, lenders in the state underwrite to it. A file that assumes otherwise gets stopped at the lender’s review, not at the finish line.
Some websites say a VA cash-out is allowed in Texas with a cap on leverage. That conflicts with the opinion. Treat it as a misconception.
So for a Texas homestead, the funding fee question has a plain answer. There is no cash-out fee to price, because the structure isn’t available. The real decision is which route does work.
What Still Works for a Texas Veteran?
Three routes come up on Texas files.
The VA IRRRL. This is a different product. It refinances an existing VA loan with no cash out, no VA appraisal, and a 0.5% fee unless exempt. It also needs a net tangible benefit and seasoning of the later of 210 days from the first payment and the sixth payment. It doesn’t pull equity, so it doesn’t run into the equity-loan restriction. Confirm the details with a loan officer before relying on it.
A conventional Texas equity loan. Texas allows a non-VA home equity loan under its own constitutional rules. Those rules cap total liens against the homestead as a share of value and set limits on fees, waiting periods, and how often you can do one. They differ from VA’s rules. Verify the current limits with a lender or the statute before planning around them.
Keeping the existing loan. Sometimes the best refinance is no refinance. If the goal is cash and the current VA loan is already in place, weigh what you’d lose by leaving it.
One more edge: the Texas restriction targets the homestead. A VA loan still requires owner occupancy, so this doesn’t open a VA option on a property you don’t live in. Occupancy decides leverage on VA loans, and VA is an owner-occupied program.
How the Fee Works Where a Cash-Out Is Available
If you’re reading this for a home outside the Texas restriction, or comparing, here is the mechanical path.
1. Certificate of Eligibility. The COE shows your entitlement and any exempt status. VA Circular 26-23-19 warns that closing as if exempt and asking for a refund later may be treated as a lender error. Refunds can’t be guaranteed.
2. Fee tier. First use or subsequent use sets the percentage. Down payment doesn’t enter.
3. Calculation. The fee is a percentage of the total loan amount. Because the fee can be financed, it raises the loan balance.
4. Appraisal. A VA appraisal sets the reasonable value that caps the loan. The cash-out can reach 100% of that appraised value, including the financed fee.
5. Costs. Under the VA Lenders Handbook, only the funding fee and energy efficiency improvements can be added to increase the loan amount on a cash-out. Other allowable charges may be paid from cash proceeds.
6. Underwriting. Residual income is the controlling test. The 41% debt-to-income figure is a guideline, not a cap. A higher ratio needs residual income well above the table. The wholesale programs start at a 580 decision score.
Does a Fee Exemption Change Anything?
It changes the cost, not the Texas rule. A veteran who receives VA compensation for a service-connected disability owes no funding fee, along with other exempt groups listed on VA’s page. Check the full list there.
Exemption is worth checking early. Our practice is to confirm it on the COE before the deal closes, since correcting it after closing isn’t something to count on. The Texas restriction still applies to an exempt veteran. No fee doesn’t mean the structure becomes available.
Two other exemption details matter. A surviving spouse refinancing with an IRRRL is not exempt unless receiving Dependency and Indemnity Compensation, per VA’s circular. And refinancing a non-VA loan into a VA loan is treated as a cash-out for fee purposes, so the cash-out tier applies. The treatment of a non-VA loan refinanced into a VA loan is worth verifying against the Lenders Handbook for your situation.
What the Decision Looks Like in Practice
Picture a Texas veteran with a conventional loan who wants cash from the homestead and assumes VA’s 100% reach applies. The file hits the equity-loan restriction. The conversation shifts from “what does the fee cost” to “which route fits.”
Now picture a veteran with an existing VA loan who only wants a lower payment structure. The IRRRL may fit, with its 0.5% fee unless exempt and no cash out.
And consider a veteran who needs cash and has substantial equity. The Texas equity-loan route is the one that exists, with limits of its own. It carries no VA funding fee, since it isn’t a VA loan.
Each of these starts the same way: check the occupancy, the loan type, the COE, and the state rule before running any fee math.
Common Mistakes on These Files
- Assuming a VA cash-out can be closed on a Texas homestead because it can elsewhere.
- Expecting a down payment to lower the cash-out fee.
- Closing as exempt and planning to claim a refund later.
- Assuming all closing costs can be rolled into the loan on a cash-out. Only the fee and energy improvements can.
- Treating the fee as monthly mortgage insurance.
Key Terms Defined
Funding fee: A one-time charge on a VA loan, paid to VA, calculated as a percentage of the loan amount.
Certificate of Eligibility (COE): The VA document showing your entitlement and any fee exemption.
Subsequent use: Any use of the VA benefit after your first, which moves a cash-out into the higher fee tier.
Homestead: The home you occupy as your primary residence, which Texas protects with its own equity-loan rules.
IRRRL: The VA interest rate reduction refinance, which replaces an existing VA loan and takes no cash out.
Residual income: What remains of your monthly income after debts and living expenses, the controlling underwriting test on VA loans.
Frequently Asked Questions
Can I get a VA cash-out refinance on my Texas homestead?
Generally no. The Texas Attorney General concluded that the VA guaranty is additional collateral, which the state’s equity-loan provision bars. The opinion is advisory, but lenders in the state underwrite to it. A veteran seeking cash from a homestead usually looks at a conventional Texas equity loan instead.
What does the funding fee cost on a VA cash-out?
It is 2.15% for first use and 3.3% for subsequent use, based on the loan amount. Exempt veterans owe none. These figures are subject to lender guidelines and full file review.
Does a down payment lower the cash-out funding fee?
No. A refinance has no down payment, so the tier depends only on whether this is your first or a later use of the benefit.
Can I roll the funding fee into the loan?
Yes. On a VA cash-out, the funding fee is one of the few items that can increase the loan amount. The cash-out can reach 100% of the appraised value including the financed fee. Other allowable costs can be paid from proceeds.
Is the VA IRRRL available in Texas?
It is a different product with no cash out, so the equity-loan restriction doesn’t work the same way. It carries a 0.5% fee unless exempt and requires a net tangible benefit. Confirm eligibility and seasoning with a loan officer.
Where to Go from Here
If you want to see how this fee affects what you actually receive, Lendmire’s piece How Much a VA Cash-Out Nets After the Funding Fee and Closing Costs walks through it. For a Texas veteran, the first step is confirming which structure the homestead allows. The VA cash-out refinance program page covers the national mechanics. 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 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: Funding fee and closing costs
2. Texas Attorney General Opinion KP-0183
4. VA Lenders Handbook Pamphlet 26-7, Ch. 8
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 a VA Cash-Out Releases With a Disability Rating · How Much Entitlement a VA Cash-Out Uses on an Existing VA Loan · VA Cash-Out Cap Requirements for Reasonable Value and the Funding Fee
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.