Cash-Out Refinance Guidelines On Government And Conforming Loans

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This BLOG On Cash-Out Refinance Guidelines On Government And Conforming Loans Was UPDATED And PUBLISHED On July 1st, 2020

What are the guidelines for refinancing government disbursements and loans

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.

Booming Housing Markets

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.

Demand Versus Inventory Of Homes

Homebuyers 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 investment property, or use it for personal and/or other reasons

In this article, we will discuss and cover Cash-Out Refinance Guidelines On Government And Conforming Loans.

Cash-Out Refinance Guidelines On FHA Loans

What are the guidelines for refinancing payments under FHA loans

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

  • Homeowners will qualify for an 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 an 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 an FHA Loan
  • There is a 12 month waiting period to do a cash-out refinance mortgage loan on an FHA Loan
  • The maximum loan to value on an 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 set 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 loans 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 an 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 take on lending on a higher-end property.

Mortgage Guidelines On USDA Loans

What are the mortgage guidelines for USDA loans?

USDA Loans will only allow rate and term refinance 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 an 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

Homebuyers looking to do a cash-out refinance mortgage on an FHA Loan, Conventional Loan, VA Loan, or Jumbo Loan, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us 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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