These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
The Quick Read: A 740 score qualifies you for both loans, so the score rarely decides the choice. Equity, occupancy, eligibility and cost structure decide it. A veteran who wants to reach the most equity, with no monthly mortgage insurance, usually finds VA stronger. A borrower who has no VA eligibility, or who wants to keep a larger equity cushion and avoid a funding fee, may do better with conventional. Program figures here are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
VA cash-out estimate
Seeded with an example value, a typical balance, and a round cash request at the first-use fee; change any field.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a VA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the full-value VA cap with the first-use funding fee 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.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a VA cash-out refinance quote; a VA loan is priced by the lender at lock. The total loan, funding fee included, is capped at the program leverage on the reasonable value; the fee follows the tier chosen. The cash available is what the cap allows less the balances paid off and the fee, before closing costs, which are not included. The HELOC line is the line program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. The debt-to-income figure is a guideline; residual income decides a VA file. Licensed in sixteen states for consumer mortgages.
What a 740 Score Does and Doesn’t Do
A 740 is a strong score under both programs, but it works differently in each. On conventional loans, the score feeds a pricing grid, so a higher score generally lowers the cost of a cash-out. On a VA loan, the score is one credit-history factor in a whole-file review. It does not change the guaranty.
VA itself sets no minimum credit score. Lenders set their own floors. The wholesale programs Lendmire places VA loans with start at a 580 decision score, so a 740 sits far above the entry point. That cushion helps. It does not replace the tests that actually control a VA file, which are residual income and the property’s appraised value.
Here is the catch. Many borrowers assume a high score means the same outcome on both paths. It doesn’t. Conventional pricing moves with score and leverage. VA pricing is lender-set, and the score is just one input. A 740 buys you options, not a verdict.
Side-by-Side
| Factor | VA Cash-Out | Conventional Cash-Out |
|---|---|---|
| Leverage | Up to 100% of appraised value, fee included | Leaves more equity in the home |
| Credit floor | None from VA; 580 on Lendmire’s wholesale programs | Set by lender and agency guidelines |
| Mortgage insurance | None monthly | Typically required above 80% LTV |
| One-time fee | VA funding fee (waived if exempt) | None; pricing built into the loan |
| Occupancy | Must live in the home | Primary, second home or other occupancy |
| Eligibility | Certificate of Eligibility required | Open to any qualifying borrower |
| Documentation | Full underwriting, residual income, VA appraisal | Automated underwriting, DTI, reserves |
Both loans require full underwriting and an appraisal. Neither is a streamline.
How Each Loan Works
A VA cash-out refinance replaces your current loan with a new one. It can pull cash from your equity, or it can refinance a non-VA loan into a VA-backed one. Per VA, eligibility comes down to two things: a Certificate of Eligibility and your plan to live in the home. A private lender makes the loan, not VA, and the lender orders the appraisal. Lendmire’s VA cash-out refinance program page covers how the product is arranged through wholesale lenders.
On the wholesale programs Lendmire places VA files with, the cash-out reaches 100% of the appraised value, including the financed funding fee. It refinances any existing loan type into VA. It also carries seasoning and a net tangible benefit, which VA’s rules require of every refinance. One point trips people up: the half-percent rate-reduction and fee-recoupment tests belong to the IRRRL, the VA streamline. They don’t apply to a VA cash-out.
A conventional cash-out follows the Fannie Mae Selling Guide. It allows cash-out for paying off the existing first mortgage, but only if that mortgage is at least 12 months old. Closing costs, points and prepaids can be financed. The loan then runs through automated underwriting on score, debt-to-income, reserves and appraised value.
How the Costs Differ
VA charges a one-time funding fee, and it can be financed. The amount depends on the loan type and whether you have used the benefit before, and cash-out refinances are priced differently from purchases. For a VA cash-out refinance the fee is 2.15% on first use and 3.3% after that. Veterans receiving compensation for a service-connected disability, and the other exempt groups, are not charged the fee.
Conventional works the other way around. There is no funding fee. Instead, cost shows up in loan-level pricing adjustments tied to your score and leverage, plus mortgage insurance when you borrow above 80% of value. Fannie Mae’s loan-level price adjustment matrix prices cash-out refinances separately from purchases and limited cash-outs. At a 740 score, the adjustment you see depends on your leverage, so check the matrix against your own loan-to-value.
The financed items matter either way. Funding fee, closing costs and prepaids all come out of the same capped loan amount, so they shrink the cash you receive and keep accruing interest. The CFPB’s Loan Estimate and Closing Disclosure guide shows “Closing Costs Financed” and “Cash to Close” as separate lines. Read both before comparing offers.
When VA Cash-Out Is the Better Fit
VA tends to win in a few situations.
- You want the most equity access. At up to 100% of appraised value, VA reaches further than conventional can. If the goal is a large payoff or a major renovation, that ceiling matters.
- You’re exempt from the funding fee. Eligible borrowers with an exemption pay no funding fee, and VA loans carry no monthly mortgage insurance.
- Your debt-to-income is high but residual income is strong. The VA Lenders Handbook treats the 41% ratio as a guide, not a cap. Per VA’s credit underwriting chapter, a ratio above 41% gets close scrutiny, and residual income is the controlling test. Conventional is more rigid on ratios.
- You’re moving out of a non-VA loan. A VA cash-out can refinance a conventional, FHA or USDA loan into VA.
- Your existing mortgage is under 12 months old. Conventional’s 12-month rule can block you. VA has its own seasoning, which on the programs Lendmire places is the later of 210 days from the first payment and the sixth payment, so the clock is different.
VA also has no limit on how many times you can use the benefit, according to VA’s home loans site. The tradeoff is the fee and the occupancy rule.
When Conventional Cash-Out Is the Better Fit
Conventional makes sense when VA’s structure works against you.
- You aren’t VA-eligible. No Certificate of Eligibility, no VA loan. This settles it for many borrowers.
- You want a smaller balance and more equity left behind. Conventional caps leave a cushion. Some borrowers want exactly that, and taking 100% of value leaves no room if prices dip.
- You’re a non-exempt veteran borrowing a modest amount. Funding fee on a larger financed balance can cost more than conventional pricing on a lower-leverage loan. Run both quotes.
- You can reach 80% LTV or below. Below that line, conventional carries no mortgage insurance, so VA’s biggest advantage shrinks. Even above it, you can ask your servicer to cancel PMI later, as the CFPB explains once the balance reaches 80% of original value.
- The property isn’t your residence. VA requires you to live in the home. Conventional cash-out can also apply to second homes, with different leverage limits. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
One more flip point. VA needs a net tangible benefit, and conventional needs only that the numbers qualify. If your goal is purely cash with little change to your existing terms, conventional may be simpler.
A Worked Comparison in Plain Terms
Picture a veteran with a 740 score, a home with solid equity and a first mortgage seasoned well past a year. Same home, same appraisal, two paths.
On VA, the borrower can reach up to 100% of the appraised value. The funding fee, if not exempt, rolls into that ceiling. There’s no monthly mortgage insurance at any leverage. Residual income must clear VA’s table.
On conventional, the borrower stays below a lower leverage cap, so the cash available is smaller. Pricing reflects the 740 score and the leverage. If the loan sits above 80%, mortgage insurance applies.
So which one nets more cash? VA, if you need the equity. Which leaves the home more protected? Conventional. Which costs less over time? That depends on exemption status, how long you keep the loan and where leverage lands. Genuinely a toss-up for a non-exempt veteran who doesn’t need the extra equity. Ask for both Loan Estimates side by side.
Cash-Out Isn’t Free Money
The CFPB’s research on cash-out refinances notes that converting non-mortgage debt into mortgage debt can put the home at risk if payments become unsustainable. Closing costs can also be substantial, and a cash-out draws down existing wealth. That applies to both programs.
Under VA rules, 38 CFR 36.4306 requires a net tangible benefit on every refinance, and a refinance may include prepayment penalties owed on the old loan.
Key Terms Defined
Certificate of Eligibility (COE): The VA document that confirms you qualify for a VA-backed loan.
Residual income: The money left each month after major obligations, which VA compares to a table by region and family size.
Funding fee: A one-time VA charge that can be financed into the loan and is waived for exempt borrowers.
Net tangible benefit: A test showing the refinance leaves the borrower better off in a way VA recognizes.
Seasoning: The minimum time or number of payments on an existing loan before you can refinance it.
LTV: Loan-to-value, the loan balance as a share of the home’s appraised value.
A Balanced Verdict
For a borrower with a 740 score, the choice isn’t about credit. It’s about eligibility, equity and cost structure.
VA is usually the stronger fit for a veteran who needs maximum equity access, wants no monthly mortgage insurance, or qualifies for the funding fee exemption. Conventional is usually the better fit for a borrower without VA eligibility, one who wants a bigger equity cushion, or one for whom the funding fee outweighs the mortgage insurance savings. Neither wins every time. Compare both on the same home with the same goal.
Frequently Asked Questions
Does a 740 score get me a better deal on VA or conventional?
It helps more on conventional, where score feeds a pricing grid directly. On VA, the score is one credit factor, and residual income plus appraised value carry more weight. A 740 is strong on both, but only conventional pricing moves visibly with it.
Can I refinance a conventional loan into a VA cash-out?
Yes. A VA cash-out can refinance any loan type into VA, including conventional, FHA and USDA. You need a Certificate of Eligibility, and you must live in the home. Seasoning rules and the net tangible benefit test still apply, subject to lender guidelines.
Is the VA funding fee always charged?
No. Veterans receiving compensation for a service-connected disability and certain other groups are exempt. For everyone else, the cash-out fee is 2.15% on first use and 3.3% on later use, and it can be financed. Exempt status can change which loan costs less.
Can I use VA cash-out on a second home or rental?
No. VA requires you to live in the home you’re refinancing. Conventional cash-out can reach other occupancies, with different leverage limits.
Does VA cash-out have a 41% debt-to-income cap?
No. The 41% figure is a guideline. A higher ratio can still proceed if residual income is well above VA’s table. Individual lenders may set stricter overlays.
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. Lendmire’s piece VA Cash-Out Refinance vs. Conventional Cash-Out Under VA Type 1 and Type 2 Refinance Rules goes deeper on how the two VA types differ.
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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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. VA.gov: Cash-out refinance loan
2. Fannie Mae Selling Guide B2-1.3-03
4. Loan Estimate and Closing Disclosure guide
6. VA Home Loans: Purchase and cash-out
8. CFPB’s research on cash-out refinances
This article is part of Lendmire’s VA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Lenders Underwrite a VA Cash-Out Refinance for a Roof · VA Cash-Out Refinance vs Conventional Cash-Out on a Duplex You Live in · How to Get a VA Cash-Out Refinance With an Unpermitted Addition
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.