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Cash-Out Refinance Guidelines On Government And Conforming Loans

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Cash-Out Refinance Guidelines On Government And Conforming Loans

This BLOG On Cash-Out Refinance Guidelines On Government And Conforming Loans Was UPDATED On July 20th, 2018

Updated Cash-Out Refinance Guidelines

Cash-Out Refinance Guidelines depends on the type of mortgage loan programs borrower selects

  • Loan to value is the key when it comes to cash-out refinance guidelines
  • FHA and Conventional Loans are the most popular mortgage loan programs in the United States
  • There are loan to value requirements and seasoning requirements when it comes to cash-out refinances for FHA and Conventional Loans
  • The key when it comes for cash-out refinancing is to find out what the property is worth
  • Housing prices in many parts of the country have been appreciating in recent years
  • This holds true especially in many parts of Florida, California, Illinois, Texas, Alabama, Virginia, Georgia, Ohio, Tennessee, Kansas, Nevada, and Arizona
  • Many homeowners in California have seen their homes appreciate more than 30% in the past three years
  • Many homeowners in Florida have seen their home values appreciate equally as much if not more
  • Texas is a booming state
  • Many homes are under contract the day it is listed
  • In the Miami-Dade area, Palm Beach County and Broward County, real estate demand is so high that many sellers are not offering sellers concessions  to home buyers anymore
  • Many homes in areas where the demand is higher than the inventory of homes that are listed on the market, homes are selling over the listing market price
  • Home buyers are willing to purchase the home over the appraised value
  • The increased demand for homes versus the housing inventory out there is creating an increase in home values throughout the country
  • This is good for homeowners who are looking for a cash-out refinance mortgage on their homes
  • They can use the extra cash to do home improvement, pay off credit card debt, use it for a down payment on an investment property, or use it for personal and/or other reasons

Cash-Out Refinance Guidelines On FHA Loans

A home buyer who purchased a home with a FHA Loan is eligible to do a rate and term streamline refinance mortgage loan

  • Homeowners will qualify for a FHA Streamline Refinance after he or she has made six monthly timely mortgage payments on their FHA insured mortgage loan
  • However, to be eligible to do a cash-out refinance mortgage on a FHA Loan, the homeowner needs to have made at least 12 months timely payments on their FHA Loan
  • There is a six month waiting period to do a rate and term refinance on a FHA Loan
  • There is a 12 month waiting period to do a cash-out refinance mortgage loan on a FHA Loan
  • The maximum loan to value on a FHA Cash-Out Refinance Mortgage Loan is 85% LTV
  • This is possible for homeowners who purchased their home with a lot of down payment or homeowners who have had their homes appreciate substantially
  • The United States Department of Housing and Urban Development, also known as HUD, is the parent of FHA
  • They are the governmental entity that sets FHA Guidelines On Cash-Out Refinance Mortgages as well as all other FHA lending guidelines.

Cash-Out Refinance Guidelines On Conventional Loans

Fannie Mae and Freddie Mac are the two mortgage giants in the United States that sets mortgage lending guidelines for Conventional Loans.

  • Conventional Loans is also often called Conforming Loans because they need to conform to Fannie Mae and/or Freddie Mac mortgage lending standards
  • Fannie Mae and Freddie Mac require a six month seasoning requirement for a Conventional mortgage loan borrower to be able to refinance their home loan into a Conventional Loan
  • Cash-Out Refinance Guidelines on Conventional Loans is borrowers need to wait six months from their home purchase in order to do a cash-out refinance mortgage
  • This is the same as with a rate and term refinance
  • Unlike on FHA Loans, the rate and term refinance waiting period is 6 months and the FHA cash-out refinance period is 12 months seasoning requirement
  • The loan to value requirement is 80% LTV on a Conventional Loan cash-out refinance mortgage where the loan to value is capped at 85% LTV on FHA Loans

Cash-Out Refinance Guidelines On Other Mortgage Loan Programs

Homeowners can also do cash-out refinance mortgage loan on Jumbo Mortgages.

  • Jumbo Mortgage Loans are called non-conforming loans
  • This is because they do not conform to Fannie Mae and/or Freddie Mac mortgage lending guidelines
  • With Jumbo Mortgages, their loan limits exceed the maximum Conventional mortgage lending limit of $453,100
  • Most Jumbo lenders will only do a cash-out refinance of up to 75% LTV
  • However, there may lenders that may do a 80% Loan To Value cash-out refinance mortgage loan on a Jumbo mortgage
  • Jumbo loans have higher credit standards and lower debt to income ratio requirements than Conventional Loans and other mortgage loan programs
  • This is due to the risk lenders takes on lending on a higher end property

Mortgage Guidelines On USDA Loans

USDA Loans will only allow rate and term refinances and will not allow cash-out refinance mortgage loans.

  • Homeowners with a current USDA Loan who have substantial equity in their homes and need to do a cash-out refinance mortgage may need to do a cash-out refinance with either a FHA Loan or Conventional Loan
  • VA Loans ( if the borrower is a veteran and meets VA mortgage lending guidelines ) allows up to 100% LTV cash-out mortgages

The United States Department of Veterans Affairs is the governmental agency that is in charge of VA Loans.

  • VA Loans is hands down the best mortgage loan program available
  • However, VA Loans are only limited to Veterans of the United States Armed Services who have a Certificate of Eligibility
  • To qualify, veterans need to have been honorably discharged from one of the branches of the United States Armed Services
  • The Department of Veteran Affairs allows up to 100% loan to value on a VA Loan Cash-Out Refinance Mortgage
  • However, there are VA mortgage lenders who will have VA mortgage lender overlays
  • Lenders with overlays may only lend up to 90% LTV on a VA Loan even if the Department of Veterans Affairs will allow up to 100% LTV VA Loan cash-out refinancing

Home buyers looking to do a cash-out refinance mortgage on a FHA Loan, Conventional Loan, VA Loan, or Jumbo Loan, please contact us at Gustan Cho Associates at 262-716-8151 or email me at gcho@gustancho.com. We are available 7 days a week to take your phone calls or email inquiries to answer any questions you may have.

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