Can you get cashback at closing on VA loans?
If you’re a veteran or active-duty service member buying a home with a VA loan, you may wonder: Can I get cashback at closing on VA loans? The short answer is yes but with restrictions. Unlike cash-out refinance loans, VA purchase loans do not allow borrowers to receive cashback beyond certain allowable costs.
In this guide, we’ll explain exactly how cashback at closing works on VA loans, what you can and can’t receive, and how to maximize your benefits as a VA homebuyer. Let’s get started!
What is Cashback at Closing on VA Loans?
When it comes to cashback at closing with VA loans, it’s important to distinguish between two concepts: cashback for personal use and the refund of upfront costs.
Cashback for personal use refers to the extra money that homebuyers might hope to receive after closing for purposes like home improvements or moving expenses. However, this type of cashback is not allowed with VA loans.
Instead, you can receive a refund of the upfront costs you have already paid. This includes earnest money deposits, appraisal fees, home inspection costs, and other prepaid expenses that might be covered by seller credits.
In simpler terms, you can think of this situation as receiving back only the money you’ve already spent—not receiving extra cash as a bonus. It’s essential to pay attention to your upfront costs so you know what you can expect to get back at closing.
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How Much Cashback Can You Get at Closing on a VA Loan?
The amount of cashback a veteran can receive depends on how much they’ve already paid toward upfront home-buying expenses. Here’s a real-life example to illustrate how this works:
Case Scenario:
When veterans decide to buy a home, they often start with earnest money. In this case, the veteran puts down $2,000. They also pay $500 for an appraisal and $350 for a home inspection.
The purchase contract includes a $7,000 seller credit to help with closing costs. After applying for this credit, the borrower only needs $5,000 at closing. Since the veteran has already paid $2,850 upfront, they can get up to $2,850 in cashback at closing their VA loans This means they can move into their new home and have some cash left over for other expenses!
This means cashback at closing on VA loans only reimburses what you’ve already spent—you cannot receive extra cash beyond your actual costs.
What Happens to Unused Seller Credits?
Suppose the seller gives you closing cost credits that exceed your actual closing costs. In that case, you can’t simply receive that extra amount as cashback at closing when using VA loans. However, there are various ways to utilize those additional seller credits:
- Buy down your interest rate (discount points): A discount point is a fee you pay upfront to lower your interest rate over the life of the loan. You can use credits to purchase these points, lowering your monthly payments.
- Apply them toward your VA funding fee: The VA funding fee is a one-time payment you need to make to the Department of Veterans Affairs to help support the VA loan program. Seller concessions can help cover this cost, making it easier on your wallet.
- Use them for a principal reduction on the loan amount: This means using the extra seller credits to pay down the principal balance of your loan, which can also lower your overall interest payments over time.
It’s important to note that the VA does not allow buyers to receive cashback from excess seller credits unless it’s a direct refund of prepaid expenses.
What Does the Department of Veterans Affairs Say About Cashback at Closing?
The VA has specific rules about getting cashback when closing on a VA loan:
- Refundable Expenses Only: You can only get cashback if it’s tied to expenses related to the loan you’ve paid upfront.
- No Cashback from Tax Credits: If the seller owes property taxes, they might give you a credit, but you can’t take that as cash back. Instead, using that credit to reduce your loan balance is better.
- Getting Approval for Tax Credits as Cashback: If you really want to receive that tax credit as cash, your lender has to ask the VA for permission. Just keep in mind that this approval isn’t a sure thing.
For example, in some states, the seller may provide you with a credit for property taxes they owe. However, this credit must go towards paying down your loan and can’t be given to you as cash at closing.
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Can You Get Cashback at Closing on a VA Refinance Loan?
There are two categories of VA refinance loans. Each category has different rules about getting cashback at closing on VA loans.
The VA Interest Rate Reduction Refinance Loan (IRRRL)
The Interest Rate Reduction Refinance Loan, abbreviated as IRRRL, is often referred to as a VA streamline refinance. This loan option assists veterans in lowering their home loan interest rates with minimal difficulty.
It’s important to know that you cannot receive cash back at closing with this refinancing option. This means you won’t get money returned to you at the end of the refinancing process. The only possible refund you might receive is for fees you’ve already paid, like appraisal costs, if one was required.
You can’t pull out extra cash from your home’s equity. Home equity is just the part of your home that you really own, which is the difference between what your house is worth now and what you still owe on your mortgage. The main point of the IRRRL is to help you lower your monthly payments, not to give you cash back.
VA Cash-Out Refinance Loan
The VA Cash-Out Refinance Loan lets veterans tap into the cash they’ve built in their homes. With this loan, you can borrow more than what you still owe on your mortgage and get the extra cash back at closing on VA loans. Just a heads up, you’ll need a full appraisal and have to meet some credit requirements to qualify.
This is a solid option if you’re looking to get some cash back when closing on your VA loan. It can help you cover expenses or even pay off some debts.
States Where Tax Prorations Affect Cashback at Closing on VA Loans
In certain states, property taxes are paid in arrears, meaning homeowners pay taxes for the previous year. This can impact closing costs and potential cashback at closing on VA loans.
Some states where property taxes are paid in arrears include:
- Illinois
- Texas
- Wisconsin
- Iowa
- Colorado
In these states, the seller credits the buyer for unpaid property taxes, which helps reduce closing costs. However, the VA does not allow this credit to be refunded as cashback unless special approval is granted.
How to Maximize Cashback on a VA Loan Closing
Even though VA loans limit cashback, here’s how you can make the most of your savings at closing:
- Ask for seller credits – Have the seller cover closing costs, freeing up your funds.
- Pay upfront expenses – The more you pay in advance (appraisal, inspections, etc.), the more you can get refunded at closing.
- Use excess seller credits wisely – Apply them to discount points or principal reduction.
- Consider a VA cash-out refinance later – If you need actual cashback beyond closing costs, this is the best route.
Get Approved for a VA Loan with Cashback on Closing Costs
A VA loan is a great choice if you are a service member currently active or a veteran seeking to purchase a home without a down payment and with low closing costs.
At Gustan Cho Associates, we specialize in VA mortgages and help veterans maximize their benefits. Whether you need guidance on cashback at closing on VA loans or want to explore VA cash-out refinancing, our team is here to help. We participate in many programs for our veterans, such as HOMES FOR HEROES and VA RENOVATION MORTGAGES.
If you have any questions about cashback at closing on VA loans or borrowers who need to qualify for VA loans with a lender with no overlays, please contact us at 800-900-8569. Text us for a faster response. Or email us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.
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Frequently Asked Questions About Cashback at Closing on VA Loans:
Q: Can I Get Cashback at Closing on VA Loans?
A: Yes, but only for reimbursing upfront costs you already paid, such as earnest money, appraisal fees, and home inspection costs. You cannot receive extra cash beyond your actual expenses.
Q: What Costs Can be Refunded as Cashback at Closing on VA Loans?
A: VA borrowers can get cashback for earnest money deposits, appraisal fees, and home inspection costs—but only if they paid them out-of-pocket before closing.
Q: Can I Use Cashback at Closing on VA Loans for Home Improvements or Personal Expenses?
A: No, VA loans do not allow cashback for personal use. Cashback is only allowed as a refund for certain prepaid expenses.
Q: What Happens if My Seller Credits are More Than My Closing Costs?
A: Any unused seller credits cannot be refunded as cash. Instead, they can be applied toward discount points, the VA funding fee, or a principal reduction.
Q: Can I Get Cashback at Closing on VA Loans from Property Tax Prorations?
A: No, the VA does not allow property tax prorations to be refunded as cashback. Instead, tax prorations must be applied to a principal reduction on your mortgage.
Q: Can I Get Cashback at Closing on a VA Refinance Loan?
A: It depends on the type of VA refinance:
- IRRRL (VA Streamline Refinance) – No cashback allowed except for refunds of prepaid expenses.
- VA Cash-Out Refinance – Allows borrowers to get actual cashback by tapping into home equity.
Q: Which States have Property Tax Prorations that Could Affect Cashback at Closing on VA Loans?
A: States like Illinois, Texas, Wisconsin, Iowa, and Colorado collect property taxes in arrears. While sellers provide tax credits at closing, these cannot be taken as cashback under VA loan rules.
Q: Can I Still Get Cashback if I Pay Closing Costs Upfront?
A: Yes! If you already paid for an appraisal or earnest money deposit, you can recoup those costs as cashback at closing.
Q: What’s the Best Way to Maximize Cashback at Closing on VA Loans?
A: The best way to maximize cashback is:
- Ask for seller credits to cover closing costs.
- Pay upfront expenses (appraisal, inspection) so you can get refunded.
- Use excess seller credits for a rate buy-down or principal reduction.
Q: What are the Requirements for Getting a VA Loan that Offers Cashback at Closing?
A: Work with a VA mortgage expert like Gustan Cho Associates. They can guide you through VA loan options and help maximize cashback at closing on VA loans. Call 800-900-8569 or email alex@gustancho.com for assistance.
This blog about “Cashback at Closing on VA Loans Mortgage Lending Guidelines” was updated on April 23rd, 2025.
