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VA Cash-Out Guideline Update

(Applicable to Wholesale Channel)

Dear Licensed Partner,

Sun West Mortgage Company, Inc. will be updating its product guidelines for VA Cash-Out Refinance transactions based on the requirements outlined in the VA Circular 26-18-30 and VA Circular 26-18-30 - Change-1. The following guidelines are effective for all VA Cash-Out refinances with an application date on or after February 15, 2019.

Summary of Changes:

Particulars Guidelines
Type of Cash-Out Refinance Dept. of VA has introduced two types of cash out refinances:
  • Type I: A refinancing loan in which the loan amount (including VA funding fee) does not exceed the payoff amount of the loan being refinanced.
  • Type II:A refinancing loan in which the loan amount (including VA funding fee) exceeds the payoff amount of the loan being refinanced.
Loan-to-Value (LTV) calculation LTV will be calculated based on the total loan amount (including funding fee if financed into the loan). The maximum LTV may not exceed 100% of the reasonable value of the property.
Net Tangible Benefit Test All cash-out refinance loans must satisfy at least one of the eight NTB requirements mentioned in this VA circular.
Disclosure on Net Tangible Benefit and Loan Comparison A disclosure must be provided to the borrower within three business days of application which, at a minimum, must:
  1. Disclose the benefit to the borrower identifying at least one of the eight NTB tests as outlined in the VA circular.
  2. Provide a comparison of the key characteristics of the loan as mentioned in the VA circular.
  3. Provide an estimate of the home equity being removed from the home as a result of the refinance and explain how the removal of home equity may affect the Veteran.
Seasoning Requirement A loan is considered seasoned if the Note date of the new loan is the later of the date that is:
  • 210 days after the first monthly payment is made, and
  • Six monthly payments have been made on the loan. Sun West requires seasoning to be met for all cash-out refinances (including Type I and Type II Cash-Out refinances).
Months to Recoup Applicable to only Type I refinance loans made to refinance an existing VA-guaranteed home loan:
  • The recoupment period of all fees, closing costs, expenses (other than taxes, escrow, insurance, and like assessments), and incurred cost must not exceed 36 months.
  • To calculate recoupment period, divide all fees, closing costs, expenses, and incurred costs (excluding taxes, escrow, insurance, and like assessments), by the reduction of the monthly principal and interest payment as a result of the refinance. If the loan being refinanced has been modified, the principal and interest reduction must be computed/compared to the modified principal and interest monthly payment.

For additional questions not answered by the guideline, please email Sun West’s Underwriting Scenario Desk at for more information.

If you have any questions, please call our Underwriting Hotline at (800) 241-7113.


Sun West Mortgage Company, Inc.

6131 Orangethorpe Avenue, Suite 500
Buena Park, CA 90620
Phone: (800) 453-7884

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This information is provided to licensed brokers/lenders only and may not be copied or distributed to customers or potential customers. All loans are subject to approval. Certain restrictions may apply. Listed pricing is a morning indication only. Program rates, prices, guidelines, fees, costs, terms and conditions are subject to change without notice.

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