Our team offers FHA Cash Out Refinances. As property values increase, many homeowners are choosing to opt for a cash-out refinance.
Here is the Criteria for a FHA Cash-Out Refinance per HUD:
For an FHA 95% Cash-out Refinance: This means you can refinance and get cash out up to 95% of your home value.
Homeowners with an FHA or conventional loan that is seasoned at least 12 months with last 12 payments made within the month due may apply for a cash-out refinance at 95%. If you don’t meet this, you’re limited to 85% Loan-to-Value (LTV).
- Yes, you can have up to 95% LTV on your FHA First note/mortgage that doesn’t exceed $417,000 (general loan limits for FHA)
- Standard cash-out maximum mortgage calculation up to 95%.
- Current appraised value is used in determining maximum loan amount. There are no seasoning requirements for subordinate liens.
- Unlimited CLTV for re-subordination and/or modification of existing subordinate financing. Also applicable for FHA first mortgages limited to 85% LTV.
So, for example, if you home is worth $300,000 you owe $200,000, you could do a cash out refinance and pull out $85,000 (save closing costs and fees) which would be a 95% cash out. Should you not meet the 95% criteria, you can refinance up to 85% and in this scenario, take out $55,000.
|FHA First Mortgage
- No prepayment penalty
- No balloon payments less than 10 years
- Payments on FHA 1st and subordinate liens, plus other housing expenses, cannot exceed borrower’s capacity to repay.
- Any periodic payments due on the second mortgage are due monthly and are essentially the same in dollar amount.
Mortgage Insurance: 1.5% UFMIP and .50% Annual Premium
The documents required for a FHA Cash Out Refinance are the standard FHA Documentation requirements.
What is a Cash-Out Refinance?
A cash out refinance allows for the homeowner to refinance his/her mortgage and take out cash on top of the refinance. For example, if had a home that was worth $300,000 and your mortgage balance was $200,000 you could do a refinance where you could take out money (cash-out) and still have the balance of the loan less than the home is actually worth. FHA offers cash-out refinances up to 95%. This type of refinance is dependent on the market value or appraised value of your property and your mortgage balance (what you owe). FHA offers a maximum refinance of 95% on your property.
A cash-out refinance is a loan that pays for your current mortgage and gives you extra cash to spend after all the loan costs are paid. You can get a cash-out refinance with an FHA loan. FHA cash-out refinance loans compare well with similar private refinance mortgages, usually providing lower interest rates and cheaper closing costs. The requirements and documentation you need for an FHA loan are also less stringent than for private refinances. The amount you can cash out on an FHA refinance depends on the market value of the property and how much you still owe on it. FHA refinances offer a maximum refinance of 85 percent on the property provided that your FHA First note/mortgage doesn’t exceed $417,000.
When an FHA Cash Out Refi Makes Sense:
There are some benefits of this type of refinance. If you’re refinancing to a lower interest rate, and you are most likely going to stay in your home for a while and you would like some extra cash for home improvements, buy a new car or whatever, a FHA cash out refi may be the right move. The costs of refinancing need to be accounted for when applying. Be sure that that before you move forward with this type of refinance, you calculate how long you will need to stay in your home so that the refinance pays off. If you need some short term cash or don’t plan to live in your home for the foreseeable future, you may want to opt for a Home Equity Line of Credit (HELOC). A HELOC usually has much lower closing costs and will allow to access cash almost immediately.
Paperwork needed for FHA Cash Out Refinance:
Like any other refinance, you’ll need to provide the necessary documentation for a cash-out refinance. Although an FHA refinance usually requires less paperwork than a conventional refinance you should make sure that you have the following:
- Address and names of employers
- List of places you’ve lived in the past 2 years
- 2 Years of W-2s and IRS Tax Forms
- Credit Check
Please note that you may not be required to present all of this information but you should have it handy as it will save you time and effort should your FHA lender ask for them.