FHA Cashout Refinance Mortgage Loans

FHA Cashout Refinance Mortgage Loans

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this article, we will cover and discuss FHA Cashout Refinance Mortgage Loans versus other mortgage refinance loan programs. Requirements for FHA Cashout Refinance Mortgage Loans are different than any other mortgage loan program. Every mortgage loan program has its own guidelines when it comes to Cashout Refinance Loans.

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Can You Do Cashout Refinance With FHA?

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As we enter the fourth quarter of 2022, Gustan Cho Associates have seen some dramatic changes in the housing market. The housing market is unpredictable at the moment due to the announcements by the Federal Reserve. This could be a time to use an FHA cash-out refinance to put you and your family in a better financial situation.  In this blog, we will detail how many of our clients are utilizing an FHA loan to refinance their homes to save money. We will also go over the steps to apply with our team. 

How Long After Forbearance Can You Do FHA Cashout Refinance Mortgage Loans?

As we exit the COVID-19 global pandemic, inflation across the world is at record highs. America is not immune to these inflationary concerns. Saving money is now more important than it has ever been. Unfortunately, inflation impacts hard-working families the hardest.

Should Homeowners Do FHA Cashout Refinance Mortgage Loans During High Inflation?

The ultra-wealthy are less affected by inflation and actually use times like this to increase their overall wealth. While the everyday working person is struggling harder than ever. The costs of everyday goods such as groceries, gasoline, housing, and entertainment are through the roof. Saving money by refinancing your home can be a great tool to combat these record-high inflation numbers.

Should I Do Cash-Out Refinance If Interest Rates Are Higher?

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Ways to utilize an FHA loan to refinance your home. Because interest rates have ticked up as the federal reserve attempts to combat inflation, many mortgage borrowers are not able to complete a rate and term refinance to save money. Chances are, you have a lower interest rate than is currently available, but if you don’t, a rate and term refinance can greatly help you.

What Is Rate and Term Refinance?

The term phrase rate and term mean you change the interest rate and term of your mortgage. With a rate and term refinance, you do not take out additional money. So you simply refinance the balance you owe on your home into a different rate and term. Ideally, you want your interest rate to go down and your term to lengthen in order to save the maximum amount of money each month. Stretching your loan back to a 30-year mortgage will help lower your overall monthly payment.

What Are FHA Streamline Refinance Loans?

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If you already have an FHA loan, you may be able to utilize an FHA streamline refinance in order to facilitate a rate and term transaction. There are a few slight differences between a true FHA rate and term mortgage and an FHA streamline mortgage. The main difference is an FHA streamline mortgage does not require an appraisal. The downside to an FHA streamline mortgage is you cannot finance all of the closing costs into your new loan amount.

FHA Cashout Refinance Mortgage Loans Eligibility Requirements

FHA Cashout refinance mortgage loans are available for owner-occupied primary residences. It can be from one to 4 units owner occupant properties. Every loan program has its own mortgage guidelines when it comes to cashout refinance guidelines and the loan to value may depend on the loan to value. In this article, we will cover and discuss cash-out refinance mortgage guidelines.

What Are The Benefits of FHA Cashout Refinance Mortgage Loans

What are FHA cashout refinance mortgage loans? An FHA cashout refinance mortgage loans are a type of transaction that will pay off your existing mortgage and add additional funds to the loan amount. You are cashing out a portion of your home equity in order to borrow money against your home.

Requirements On FHA Cashout Refinance Mortgage Loans

One of the most frequently asked questions at Gustan Cho Associates is what are the underwriting guidelines for an FHA cashout refinance mortgage loans. There are various key underwriting guidelines on FHA cashout refinance mortgage loans. We will cover the credit, payment history, automated underwriting system, and debt-to-income ratio requirements on FHA cashout refinance mortgage loans in the following paragraphs.

FHA Cashout Refinance Mortgage Loans Credit Score Guidelines

Credit score – Since Gustan Cho Associates has access to FHA lending without lender overlays, we have the ability to assist borrowers with a credit score as low as 500. 500 is the minimum qualifying credit score for an FHA mortgage loan. Depending on your credit profile, you may not qualify based on your credit score only. If your credit score is on the lower side, additional positive factors may be required in the underwriting process.

Manual Underwriting on FHA Cashout Refinance Mortgage Loans

Typically, a credit score of 580 will allow you to move forward with a manually underwritten loan. With an FHA mortgage loan, the target credit score is 620 or higher. With a 620 credit score, you usually receive automated approval with the AUS system. For more information on credit scoring and details surrounding the automated underwriting system, please reach out to Mike Gracz at (800) 900-8569 or send an email to alex@gustancho.com.

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Payment History Guidelineson FHA Cashout Refinance Mortgage Loans

Payment history – To piggyback off the minimum qualifying credit score, payment history is a key factor when qualifying for an FHA cash-out transaction. Typically, the automated underwriting system wants to see a minimum of 12 months of all on-time payments. However, you are allowed the occasional late payment on a credit card within the past 12 months. If you have late payments on your credit report, that will not automatically disqualify you, but you must follow FHA guidelines.

Getting Automated Approval on FHA Cashout Refinance Mortgage Loans

The automated underwriting system may still give you approval because the equity position is at least 20%. No two FHA cashout refinance mortgage loans are the same, so we encourage you to let our team attempt to get you prequalified even if you have had late payments in the past. If you have late payments on your current mortgage, then it will be incredibly difficult to qualify for an FHA cash-out transaction. Payment history is very important when qualifying for a mortgage loan. 

HUD DTI Guidelines on FHA Cashout Refinance Mortgage Loans

Debt-to-income ratio – Depending on the automated underwriting system, you may be able to stretch your debt to income as far as 46.99/56.99. We understand these ratios are mortgage lingo, so reach out to our team today for more information. If your loan requires a manual underwrite, you will need to follow maximum debt-to-income requirements based on credit score and compensating factors.

How Mortgage Underwriters Calculate Debt-To-Income Ratio on FHA Loans

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Calculating debt to income can be incredibly confusing for a consumer, which is why we suggest you reach out to Gustan Cho Associates today. Certain obligations such as student loan debt have a certain monthly calculation and we want to make sure you are completing this process correctly. Gustan Cho Associates offers a highly sophisticated mortgage calculator, adding up your mouth the obligations can be confusing if you are not well-versed in the mortgage industry. Our team of experts is available to assist you! 

FHA Cashout Refinance Mortgage Loans Mortgage Process

Here are the guidelines for cashout refinance mortgage loans.

  • Full Appraisal is required
  • Non-Occupant Co-Borrower may not be added
  • Any co-borrowers added need to be occupant co-borrowers
  • FHA Cashout Refinance Mortgage Loans allow up to 80% Loan To Value on one to four-unit properties
  • Any payoff statements are required if the property has liens

Proceeds from FHA Cashout Refinance Mortgage Loans can be used for many purposes. All proceeds from cashout refinance are tax-free.

What Does FHA Cashout Refinance Mortgage Loans Mean?

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FHA cashout refinance mortgage loans transaction. Due to current market conditions, most refinance transactions have been cash-out transactions as of late. The term cash out means you refinance above and beyond the current balance of your current mortgage, taking out equity during the process.

Is FHA Cashout Refinance Mortgage Loans Plan Worth It?

FHA cashout  refinance mortgage loans can help save you hundreds of dollars each month. Many clients of Gustan Cho Associates take advantage of a cash-out refinance transaction to pay off consumer debt, complete projects around the house, pay off bankruptcy, invest in future business deals, or even prepare for retirement.

Our team of highly skilled loan officers has helped hundreds of families refinance their homes to put the equity in their walls to work for them. A cash-out refinance can be a great tool and help set you up for long-term financial success.

How Much Can You Take Out on FHA Cashout Refinance Mortgage Loans?

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You can borrow up to 80% of the total value of your home based on a third-party professional appraisal. The amount of money a specific borrower may “cash out” is solely dependent on the value of your property. You are always required to retain at least 20% equity in your home.

Refinance Waiting Period After Purchase To Refinance

If the homeowner has owned the subject property for less than 12 months prior to applying for FHA Cashout refinance mortgage loans, the Loan to Value and/or Cumulative Loan To Value (LTV/CLTV) is capped to the lesser of the subject property’s appraised value and/or the original purchase price of the property.

HUD Refinance Waiting Period Guidelines

If the homeowner has occupied and owned the subject property for at least one year to apply for a mortgage application, then 80% LTV and/or CLTV will be based on the appraisal of the property. If the borrower has inherited the subject property and is occupying the property and the property is an owner-occupant property. 80% LTV/CLTV based on the recent home appraisal value is permitted. The length of ownership does not matter.

Net Tangible Benefits Guidelines on Rate and Term Refinance

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Depending on your current financial situation, current interest rate and FHA streamline refinance may not be an option for you. Part of an FHA streamline refinance requires your interest rate to go down by at least half of a percent. Because interest rates have picked up over the past 10 months, it may be impossible to lower your rate based on market conditions. You may still qualify for a true rate and term FHA transaction. Reach out to our team today to see if this is an option that will help your overall financial situation. 

Does Rate and Term Refinance Restart Your Term?

You may still be able to utilize a rate and term refinance. Let’s say you have an FHA loan from 15 years ago, so you currently have 15 years left. And your interest rate is 6%. You may be able to complete a rate and term refinance moving all the way back to a 30-year mortgage at a similar rate which will help significantly lower your monthly mortgage payment.

Reasons To Do Rate and Term Refinance Mortgage Loans

Keeping all payments as low as possible during these tough economic times can be the difference between you staying above water or sinking into a financial hole. Gustan Cho Associates are made up of mortgage experts who are here to analyze your current loan and see if we are able to save you money in a way that makes financial sense. The mortgage industry is highly regulated and if a rate and term transaction does not make financial sense, we legally cannot move forward with the refinance.

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What Does Home Equity Mean?

Equity is defined as the difference in the total value of your home versus how much you currently owe on your home. As stated above, there has been rapid appreciation in homes across the nation over the past few years. Many real estate experts estimate that over 90% of homeowners currently have equity in their homes. So this may be a great time to complete a cash-out refinance.

Can I Do FHA Cashout Refinance With Late Payments?

Borrowers for FHA cashout refinance mortgage loans need at least a six-month mortgage payment history if it is a recently purchased property. Mortgage payment histories of less than six months do not qualify for cashout refinance mortgage loans. Here are the payment history requirements:

  • If the borrower purchase property less than 12 months but greater than six months, zero late 30 day late payments are allowed
  • If the borrower has owned the property for more than 12 months, the last 12 months cannot have any 30 days of late payments

Occupancy of Former Investment Property

Occupancy Of Former Investment Property

If a homeowner decides to occupy a property that was formerly used as an investment property, the loan to value capped will be limited to 85% Loan To Value and/or Cumulative Loan To Value.

Secondary Financing

New secondary and/or subordinated financing on the property is not permitted. However, if there is an existing subordinate loan to lower the total indebtedness is not considered a new subordinate lien. This may be subordinated under HUD Guidelines.

Differences Between FHA Cashout Refinance Mortgage Loans Versus Other Mortgage Programs

Conventional Loans have different cashout refinance mortgage guidelines. Here are Conventional Cashout Refinance Guidelines:

  1. 80% loan to value on single-family homes
  2. 75% loan to value on two to four units

VA Loans Cashout Refinance Requirements

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VA loans allow 100% LTV cashout refinance. USDA does not allow cashout refinance. Borrowers who have more questions on doing a cashout refinance on their homes, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.

How Soon Can I Do FHA Cashout Refinance Mortgage Loans?

Applying for a mortgage has never been easier. Our team will need you to complete a basic online application and submit financial documentation. When refinancing your current home loan, we will need to verify your income, mortgage statement, credit score, and in some cases, assets (for reserves). After your mortgage consultation with Mike Gracz, you will be paired with a licensed loan officer in the state in which the property is located.

Mortgage Process of FHA Cashout Refinance Mortgage Loans

After you fill out the online application, your loan officer will prepare to refinance options. When refinancing your home with an FHA loan, you will have a few different options at your disposal.  We strive to offer our clients multiple different options to help put them in the best financial situation possible.

After you submit the application and upload the required documentation, loan options will be presented to you. A great feature of a refinance transaction is you can always change the terms of the loan during the process. For example, if you decide you want to take less cash out, we can always adjust your loan amount during the underwriting process. For any general questions or to set up your initial application, reach out to our team today.

How Does The FHA Cashout Refinance Application Process Work

After reading this article, hopefully, you understand the expertise offered by Gustan Cho Associates with FHA Cashout refinance mortgage loans. Our team of highly skilled loan officers and operations staff are here to assist you to get your cash-out to refinance to the finish line in a timely manner. We have helped numerous clients significantly improve their overall financial picture with a simple refinance transaction.

How Long Does FHA Cashout Refinance Mortgage Loans Take?

Most FHA cashout refinance mortgage loans normally does not go beyond 30 days. Cashout refinance mortgage loans can take longer depending on how fast the home appraisal takes. Regardles

s, FHA Cashout refinance mortgage loans should not take longer than 30 to 45 days from the start of the loan application date until the loan closes.

We encourage you to reach out to our team with any questions or even for an estimate on the value of your home. We have access to sophisticated software that can give you a better understanding of how much equity you have at this current time. With all the uncertainty in the global markets, lowering your monthly financial obligations is very important.

How Much Are Upfront Fees on FHA Cashout Refinance Loans

Our team is here to help put you in a better spot with a free refinance quote today. There is no upfront fee to see what your options are. The team at Gustan Cho Associates is available seven days a week and, in the evenings, to fit your busy schedule. If we can help save you money, we will do everything in our power to make that happen. Please call Mike Gracz at (800) 900-8569 or send an email to alex@gustancho.com to schedule your one-on-one mortgage consultation. 


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