- Housing values have been skyrocketing for the past several years
- Year after year, home values throughout the nation have been rising
- In many areas, home values were increasing double digits year after year
- Due to skyrocketing home prices, HUD and the Federal Housing Finance Agency (FHFA) have been increasing FHA and Conventional Loan Limits for the past four years
- The FHA loan limit for 2020 is $314,760
- 2020 Conforming Loan Limits is now capped at $510,400
- Due to the skyrocketing home prices and values, HUD decided to lower the maximum loan to value on Cash-Out Refinance Mortgage on FHA loans from 85% LTV to 80% LTV
In this article, we will discuss and cover FHA Cash-Out Refinance Mortgage Guidelines On FHA Loans.
2020 UPDATE On Cash-Out Refinance Guidelines
Many homeowners do not realize the amount of equity they have in their homes due to skyrocketing home values.
- HUD, the parent of FHA, allows homeowners to refinance their existing home loans and cash out additional equity
- The proceeds from the cash-out refinance is tax-free
- Homeowners can use the cash from the cash-out refinance mortgage for any purpose they like
Michelle McCue of Gustan Cho Associates defines an FHA cash-out refinance as the following:
An FHA cash-out refinance is a new mortgage against the home which pays off the existing mortgage, plus provides additional money from the remaining equity in the home to be used for other purposes.
Popular reasons to use cash proceeds from a cash-out refinance are the following:
- Home renovations and improvements
- Pay off other high-interest debts such as credit card debt, auto loan, student loans, second mortgage, and other debts
- Investments such as buying another property, buying a second home, stocks, and bonds
- Pay for a wedding
- Use the proceeds to start a business
Homeowners with equity in their homes may qualify for an FHA Cash-Out Refinance Mortgage. HUD recently lowered the loan to value of cash-out refinance mortgages on FHA loans from 85% to 80% loan to value.