Requirements On FHA Cash Out Refinance Guidelines
This BLOG On FHA Cash Out Refinance Guidelines Was Written By Gustan Cho NMLS 873293
There are different types of FHA Refinance Mortgage Loan Programs.
- The first is the FHA Streamline Refinance which a current homeowner with a FHA Loan can do a rate and term
- FHA refinance mortgage loan with no credit scores, no appraisal required, and no income verification.
- In order to qualify for a FHA Streamline Refinance Mortgage, all borrowers on the initial FHA mortgage loan needs to be on the new FHA Streamline Refinance Mortgage Loan.
- The second type of FHA Refinance Mortgage Loan is the general FHA Refinance Mortgage where an appraisal is required, credit scores are required, and income verification is required.
- This type of FHA Refinance Mortgage Loan is common for FHA mortgage loan borrowers who want to take off a non-occupant co-borrower off the original FHA mortgage loan.
- Maximum loan to value required on FHA Refinance Mortgage Loans that are just rate and term is 97.75%.
- FHA Cash Out Refinance Guidelines require a maximum of 85% Loan To Value.
FHA Cash Out Refinance Guidelines Versus Conventional Cash Out Refinance Guidelines
To qualify for a FHA Refinance Mortgage Loan, you need to wait six months from the date of your initial mortgage loan closing.
- The six month waiting period to refinance a FHA Loan only applies for a rate and term FHA Refinance Mortgage Loan and FHA Streamline Refinance Mortgage Loans.
- FHA Cash Out Refinance Guidelines have mandatory one year waiting period after the closing of the original mortgage loan.
- Maximum cash out allowed with FHA Cash Out Refinance Loans is 85% Loan To Value.
- To qualify for a Conventional cash out refinance mortgage loan, homeowners are eligible six months after the closing of their initial mortgage loan.
- Conventional loans do have six month waiting periods for rate and term conventional loans as well as cash out conventional loans.
- Maximum loan to value on cash out conventional mortgage loans is capped at 80% loan to value.
Mortgage Insurance Premium Requirements
All FHA Loans require annual FHA mortgage insurance premiums for the life of the 30 year FHA fixed rate mortgage loan including FHA Cash Out Refinance Mortgage Loans.
- Annual FHA mortgage insurance premium is currently at 0.85% of the FHA Loan amount and is paid monthly.
- With conventional loans, private mortgage insurance is required for all conventional loans with loan to values higher than 80% LTV.
- Since the cap on cash out conventional refinance mortgage loans is capped at 80% LTV, no private mortgage insurance is required on cash out conventional refinance mortgage loans.
Mortgage Rates On FHA Cash Out Refinance Mortgage Loans
There are pricing adjustments on cash out refinance mortgages.
- Mortgage rates on FHA Cash Out Refinance Mortgage Loans are slightly higher than mortgage rates on FHA rate and term refinance mortgage loans.
- Mortgage rates on cash out conventional refinance mortgage loans are also higher than standard rate and term conventional mortgage rates. Other pricing adjustments on higher mortgage rates are 2 to 4 unit properties.
- Two to Four unit properties have higher mortgage rates than mortgage rates on single family homes. Condominiums have higher mortgage rates than single family homes. The higher your loan to value, the higher your mortgage rates.
- The higher mortgage rates is call pricing adjustments and the reason for pricing adjustments is due to the fact that mortgage lenders consider higher risk.
Proceeds From FHA Cash Out Refinance Mortgage Loans
Lenders cannot dictate on what to do with the proceeds from your cash-out refinance mortgage. You can use the proceeds from your FHA Cash Out Refinance Mortgage for any reason you see fit. Here are what most homeowners use their cash proceeds from their cash out refinance mortgages:
- Pay off a second mortgage or Home Equity Line Of Credit, HELOC.
- Pay outstanding credit card balances.
- Pay auto loans.
- Remodel their home.
- Use it for college education.
- Use it to pay off car loans or purchase a new vehicle.
- Use it for emergencies such as medical bills or elderly care.
- Use it for personal reasons such as taking vacations.
- Use it to pay for high ticket events such as weddings and anniversaries.