This BLOG On Cash-Out FHA Refinance Mortgage Guidelines And Requirements Was UPDATED And PUBLISHED On September 22nd, 2020
- An FHA streamline mortgage is available for homeowners who had their FHA loan for at least six months
- HUD, the parent of FHA, requires all homeowners been timely on their mortgage payments for the past 12 months
- There is no appraisal required and no income verification on FHA Streamline Mortgages
- Homeowners can be late on monthly payments and have low credit scores and still qualify for an FHA streamline refinance mortgage
- They can qualify for FHA Streamline Refinance as long as their mortgage loan payments have been current for the past 12 months
- There is no income verification needed either
- Homeowners do need a full-time job
- But the income will not be verified so high debt to income ratios will not be an issue
- FHA streamline refinance mortgage loans are only for rate and term refinance mortgage loans only
- Cash-out refinance mortgage does not apply
- A rate and term refinance mortgage is only limited up to a $2,000 cash-out limit
- Any proceeds over $2,000 from the proceeds of a refinance mortgage is considered a cash-out refinance mortgage
In this article, we will cover and discuss Cash-Out Refinance Guidelines And Requirements.
FHA Refinance Mortgage Lending Guidelines
There are strict cash-out refinance mortgage lending guidelines and seasoning requirements on FHA loans.
- Homeowners do not need a current mortgage in order to do a cash-out FHA refinance mortgage
- Any cash-out refinance mortgage loan to value cannot exceed 80% of the appraisal on FHA loans
- If the property has been owned by a homeowner for less than one year, the new cash-out refinance needs to be either the lesser of 80% loan to value of the appraised value or 85% of the original purchase price
- This poses a problem for a homeowner who purchased a foreclosure or short sale at a low price and invested tons of money rehabbing the property
For example, here is a case study:
- if a home buyer purchased the property at $100,000
- invested $100,000 in doing major renovations
- has it appraised at $200,000
- wants to do a Cash-out FHA refinance mortgage in less than a year after they made the home purchase
- then they are limited to 85% of the appraised value or 85% of the purchase price, whichever is lower
- In this case, if the cash-out FHA refinance mortgage is getting refinanced in less than 12 months of the purchase date, then the homeowner will be limited to 85% of the purchase price
- Not 85% of the $200,000 appraised value
- For the homeowner to get an 85% cash-out refinance mortgage loan, then the homeowner has to wait at least 12 months in order to initiate the cash-out FHA refinance mortgage
If the property was inherited and the heir is using it as an owner occupant home, then the cash-out FHA mortgage seasoning requirement is exempt.
Conventional Loan Refinance
Conventional guidelines differ from FHA refinance mortgages.
- With conventional loans, homeowners can do a rate and term refinance mortgage loan as well as cash-out refinance mortgage with six months seasoning
- Maximum loan to value on conventional refinance mortgages are 80% loan to value based on the appraised value
- Some conventional mortgage lenders may require two appraisals if the conventional refinance mortgage loan application is just six months from the original purchase date
Homeowners who need to qualify for a Cash-Out FHA Refinance Mortgage with a direct lender with no mortgage lender overlays can contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at firstname.lastname@example.org.