The ceiling is 100% of reasonable value
The regulation is direct: the new loan “must not exceed an amount equal to 100 percent of the reasonable value… of the dwelling.”1 That value is the figure the VA appraiser establishes on the Notice of Value, and any financed funding fee counts inside it.1
A cash-out refinance has to satisfy at least one of eight benefit tests. One of those eight is that the new loan is 90% of value or less. It is a way of passing the test — not a cap.1
Anyone quoting you 90% as the VA limit has confused a qualifying test with a ceiling. Meet any one of the other seven and the loan can go higher. Lenders do set their own overlays below the VA maximum, and that is a legitimate answer — but it is the lender's rule, and it is worth knowing which one you are being told.
The eight tests
The loan must meet one or more of the following:1
- It eliminates monthly mortgage insurance or guaranty insurance
- The term of the new loan is shorter than the loan being refinanced
- The interest rate is lower than the loan being refinanced
- The payment is lower than the loan being refinanced
- It increases your monthly residual income
- It refinances an interim construction loan
- The new loan amount is 90% of reasonable value or less
- It refinances an adjustable rate mortgage into a fixed rate loan
Seasoning, when the loan being refinanced is a VA loan
The same rule as an IRRRL applies: the new loan cannot be guaranteed until the later of 210 days from your first monthly payment and the date the sixth payment is made.1
What if your credit has taken a knock
VA sets no minimum credit score. A low one does not automatically mean the file has to be underwritten by hand either — these go to the automated systems first and a good many come back approved. Where one will not take the file, we underwrite the cash-out manually to VA's own guidelines — down to a 500 score, with debt ratios well past the 41 percent guideline where residual income supports it.2 If a lender has already declined you on score or ratio, that was their overlay, not VA's rule.
Two comparisons you are entitled to
Your lender must hand you a standardised comparison of the new loan against your existing loan twice — not later than three business days from application, and again at closing — and you certify that you received both.1
That document is the point. It sets the two loans side by side: amounts, rates, terms, total payments, loan-to-value. If nobody has walked you through it, ask them to, because it is the clearest statement anyone will give you of what the refinance actually does.
And the usual caution. Costs rolled into the new balance are repaid with interest over the life of the loan, so the cash you avoid bringing to closing is not the measure of what it cost. Same principle as any “no closing cost” loan.
Sources
These references support the factual explanations above. Where this page states a preference rather than a fact, it says so — those are our editorial judgement, not a claim that any one channel always costs less.
Next
The VA IRRRL, and the rule that governs itSeasoning, the 36-month recoupment test, and why it shapes how the loan is structured.What “no closing cost” can meanNobody is working for free. The question is where the cost went.Priced against your actual file
Entitlement, funding fee exemption and what you can actually borrow, worked out properly rather than estimated. We can pull your Certificate of Eligibility for you. Nothing here touches your credit.