Cash-Out Refinancing Mortgage Guidelines On Home Loans

Gustan Cho Associates are mortgage brokers licensed in 48 states

Homeowners can take advantage of utilizing their equity in their homes to pay debt with the lenient Cash-Out Refinancing Mortgage Guidelines On Home Loans. The housing market is booming. Home prices are hitting historic record highs due to the demand for homes and inventory shortage. The Federal Housing Finance Agency (FHFA) has increased the conforming loan limit for 2022 to $647,680 due to skyrocketing home prices. The 2022 conforming loan limit of $647,680 was a sharp increase from the 2021 conforming loan limit of $549,250. The FHFA has increased the conforming loan limit for the past six years in a row due to skyrocketing home prices.

High-Balance Loans In High-Cost Counties

The high-balance conforming loan limit in high-cost counties is now capped at $970,800. HUD, the parent of FHA, has increased the 2022 FHA loan limit to $420,680. FHA loan limit for 2021 was capped at $356,362. 2022 FHA loan limit of $420,800 is almost a $100,000 increase from 2021’s FHA loan limit. High-balance FHA home loans for single-family homes ceiling limit in high-cost counties in 2022 has increased to $970,800. That is almost a one million dollar loan limit on an FHA loan in high-cost areas. HUD followed the FHFA and increased the FHA loan limit for the past six years due to rapidly increasing home prices.

Skyrocketing Home Prices Benefit Homeowners With Earning Equity In Their Homes

Homeowners are reaping the rewards of their homes appreciating like never before in history. Millions of homeowners are sitting in homes with substantial equity. Most homeowners who owned their homes for a few years can easily qualify for a cash-out refinance. All cash-out refinances are tax-free. Homeowners do not have to pay taxes on the cash proceeds from cash-out refinancing. You can spend the funds from your refinance on anything you like. Many people spend it to pay debts while others use it to renovate their homes or investments. Paying your car loan off is another common way homeowners use the proceeds from their cash-out refinance. In this article, we will discuss and cover the cash-out refinancing mortgage guidelines on the various mortgage loan programs.

Homeowners Tapping Into The Equity In Their Homes Due To Historic Low Rates

Most homeowners have had double-digit appreciation in their homes. Home prices have risen double digits in the past three to four years due to the housing boom. Rates are still at historic lows but most believe mortgage rates will start rising in 2022. Millions of homeowners have scored with major double-digit home appreciation. Ample equity plus historic low rates is a formula to think about going for a cash-out refinance mortgage. As thousands of Americans are keeping an eye on the mortgage market, there has been an uptick in cash-out refinancing.

Starting The Cash-Out Refinance Mortgage Process

Gustan Cho Associates is a full-service mortgage lender licensed in multiple states without any LENDER OVERLAYS. As interest rates drop, many Americans are seizing this opportunity to get their financial picture back in focus. In this blog, we will detail what cash-out refinancing means and how to start your cash-out refinance. The rules for cash-out refinancing are ever-changing and a big rule change was just announced for FHA mortgages.

Cash-Out Refinancing Mortgage Process

What does cash-out refinancing mean?

A refinance transaction where you take equity out of your property in the form of cash. This cash can be taken out in a few different forms. Some families have a free and clear house, and some families pay off their current mortgage and take additional cash out. Either way, the refinance transaction results in a higher loan amount than previously on the property. This allows you to use the equity in your walls without selling the property.

Why Do Americans Take Cash Out Of Their Properties?

There are many reasons to take cash out of your property. It is a way to borrow money at a low rate with relatively low risk. You are able to amortize cash-out refinance for up to 30 years, giving Americans cheap access to extra money. Especially if you are going to stay on the property for a while, these funds can help your family. Debt consolidation, home renovations, and investing are the most common reasons Americans take cash out of their properties. Utilizing the cash out to pay off high-interest consumer debt can help hit the reset button on your finances. Turning the high-interest credit card debt, it into tax-deductible mortgage interest has many benefits.

Example:

Liabilities Paid

In this example, a client will consolidate their current mortgage, auto loan, and credit cards into one new loan. They are also getting $11,000 in cash proceeds AFTER paying these debts. All said and done, they save $219 a month. Savings like these are not uncommon for cash-out refinances.

What Are The Cash-Out Refinancing Requirements? 

The qualifications will be different for each mortgage product. Conventional, FHA, and VA mortgages all have different requirements.

Minimum credit score required on cash-out refinancing per loan program:

  • FHA -500
  • Conventional – 620
  • VA – No minimum credit score

USDA does not allow for cash-out refinancing.

Loan-to-value requirements required on cash-out refinance mortgages:

  • HUD – as of September 1st, 2019 – 80% Max LTV on FHA cash-out refinance mortgage loans
  • Fannie Mae and Freddie Mac: Conventional loans allow an 80% Max LTV on cash-out refinance mortgage loans
  • VA – 100% MAX LTV (including VA funding fee) on VA cash-out mortgages

What Items Are Needed To Start The Cash-Out Refinance Mortgage Process? 

  • Driver’s License
  • Last 30 Days of Pay Stubs
  • Last Two Years Tax Returns – (not always needed)
  • Last Two Years W2 or 1099s
  • Current Mortgage Statement
  • Homeowners Insurance Policy

What Are The Closing Costs On Cash-Out Refinance Mortgage Loans

With any mortgage transaction, there will be closing costs involved. The good news with refinance transactions as these costs is not out of pocket. With a purchase transaction, the closing cause may not be wrapped into the loan. that is not true for refinancing. The only out-of-pocket expense prior to closing is the cost of an appraisal. The appraisal fee will vary depending on your state and loan product. All of the LOAN FEES will be disclosed to you on a Loan Estimate. Fees included in Cash-out refinance transactions include lender origination, title work, local fees and taxes, and in some cases ESCROWS. Title fees are much lower for refinancing your home versus purchasing be home. Please call Mike Gracz on 630-659-7644 for more information on costs associated with a refinance.

Texas Cash-Out Refinancing Mortgage Requirements And Guidelines On Home Loans

Texas Cash-Out Refinancing Mortgage Guidelines On Home Loans

Texas Cash-Out Refinance Rules:

  • Texas is one of the largest states in the country, and they have a few different refinance rules
  • You may not utilize an FHA or VA cash-out refinance in the state of Texas
  • This is due to the Texas A (6) cash out rule
  • Please click our blog on TEXAS CASH-OUT A (6) REFINANCE RULES for more information
  • It is unclear with the new FHA MAX LTV guideline change if Texas will amend their A (6) mortgage guidelines
  • In short, this A (6) rule does not allow the citizens of Texas to utilize any loan product which allows refinancing above 80% loan to value
  • As the current guidelines state, FHA allows cash-out refinances up to a loan to a value of 85% (changing to 80% LTV on September 1st, 2019)
  • VA cash-out refinances are able to go to 100% loan to value

If you are a Texas citizen, visit our website after September 1st for an update on FHA Cash-Out.

Take Advantage With The Lowest Mortgage Rates In The Past 3-Years

Mortgage interest rates recently hit a three-year low. This is a great time for American families to utilize the equity in their homes to help better their current situation. Thousands of Americans are able to take cash out of their property and lower their interest rate at the same time. If you utilize the cash proceeds to pay off existing consumer debt, you may save hundreds of dollars a month. No two clients’ Financial situations are identical. Please reach out to Gustan Cho Associates for a fully customized Cash-out refinance consultation. Reach out to the team at GCA Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at [email protected] After your initial conversation, you will be paired with highly skilled Loan Officers from The Team at Gustan Cho Associates! Let’s see how much money we can save you!