Can I Get Cash Back From My VA Loan?
October 18, 2010 By Joe Wallace No comments
When can a veteran borrower get cash from a VA home loan? Do VA loan rules allow a borrower to receive cash as part of the loan agreement? Or does the borrower have to invest all monies borrowed into the purchase or improvement of the property?
These are questions many first-time borrowers have; like many other aspects of VA mortgages, the answer depends greatly on the type of VA loan and the circumstances the borrower finds himself or herself in.
When it comes to a regular first-time home purchase, the buyer cannot get cash back from the VA home loan. If credit is extended, that credit is expected to be used for the purchase of the home. There is only one exception in this instance; when a buyer pays cash up front for an item that is later included in the VA home loan financing, the cash is refunded.
For example, if the borrower paid a VA funding fee up front and in cash but that fee was included in the VA loan amount, the buyer would be entitled to a refund since the fee has been rolled into the loan amount. (the buyer wouldn’t need to
pay this amount up front unless the decision had been made NOT to finance the VA loan fee, we’re just using it as an example here.)
A VA loan applicant is also entitled to a refund of earnest money paid on a no-downpayment loan, but otherwise no cash back should come to the buyer. The VA cash-out refinancing home loan is one loan product where the VA borrower may get cash back, and for Interest Rate Reduction Refinancing loans under specific circumstances.
The VA generally does not allow IRRRLs to result in cash back to the borrower except when the loan applicant has made energy efficient improvements to the property and included those improvements in the loan amount. According to the VA, cash back to the borrower in these cases is limited to“…reimbursement of the veteran for the cost of energy efficiency improvements up to $6,000 completed within the 90 days immediately preceding the date of loan closing.”
About Joe Wallace
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.