VA Cash-Out Refinance changes
Here are the highlights directly from the VA guidelines
“c. All cash-out refinancing loan applications taken on or after February 15, 2019, as reflected by the application date, that do not meet the following requirements will not be eligible for guaranty by VA: LOCAL REPRODUCTION AUTHORIZED December 19, 2018 Circular 26-18-30 (1) Loan-to-Value (LTV).
VA will no longer guaranty refinancing loans when the LTV exceeds 100 percent. If the Veteran chooses to close a loan in which the loan amount exceeds 100 percent of the reasonable value of the property, the Veteran must pay the amount which exceeds 100 percent of the property value at loan closing.
(a) LTV Calculation. Divide the total loan amount (including VA funding fee, if applicable) by the reasonable value on the Notice of Value of the property determined by the appraiser.
(2) Net Tangible Benefit Test (NTB). Lenders must ensure that all cash-out refinancing loans pass a NTB, which includes providing the Veteran with the following information no later than the third business day after receiving the Veteran’s loan application, and again at loan closing:
(a) The refinancing loan satisfies at least one of the following eight NTB:
(i) The new loan eliminates monthly mortgage insurance, whether public or private, or monthly guaranty insurance;
(ii) The term of the new loan is shorter than the term of the loan being refinanced;
(iii) The interest rate on the new loan is lower than the interest rate on the loan being refinanced;
(iv) The payment on the new loan is lower than the payment on the loan being refinanced;
(v) The new loan results in an increase in the borrower’s monthly residual income;
(vi) The new loan refinances an interim loan to construct, alter, or repair the home;
(vii) The new loan amount is equal to or less than 90 percent of the reasonable value of the home, or;
(viii) The new loan refinances an adjustable rate loan to a fixed rate loan.
For more info visit : https://www.benefits.va.gov/homeloans/documents/circulars/26_18_30.pdf