Can I refinance a conventional loan into a VA loan?

Chapter 6 of the VA Lenders Handbook covers cash-out refinances, and the point that surprises people is the name: any refinance of a non-VA loan into a VA loan is a "cash-out" for VA purposes, even if you receive no cash. VA distinguishes a Type I cash-out, where the new loan amount including the funding fee does not exceed the payoff of the loan being refinanced, from a Type II, where it does — and financing your closing costs or the fee is usually enough to make it a Type II, and applies its net-tangible-benefit test to both. VA's seasoning requirement — 210 days from the first payment due date plus six consecutive payments — applies only when the loan being refinanced is itself a VA loan, so it does not apply here.

What it takes: full underwriting (credit, income, residual income), a VA appraisal, available entitlement, and the cash-out funding fee — higher for subsequent use, waived for exempt veterans. The occupancy rule applies: the home has to be your primary residence.

When it wins: you have an FHA loan with mortgage insurance for life, a conventional loan with PMI, or a second lien you want consolidated at a first-lien rate. When it loses: the fee and closing costs outweigh a small rate improvement, or you plan to sell soon. The cash-out page covers the Type I and Type II rules and the lender loan-to-value overlays; for an existing VA loan, the IRRRL is the cheaper tool.