FHA Cash Out Refinance Requirements
This BLOG On What Are The FHA Cash Out Refinance Requirements Versus Other Loan Programs Was Written By Gustan Cho NMLS 873293
Home prices have been appreciating since 2011 and it seems like the real estate market is going strong. Housing demand for housing throughout the United States has been consistently strong. The real estate meltdown of 2008 has crushed home values where some homes have dropped 50% in value in some areas of the country. Millions of homeowners were stripped of their hard earned equity in their homes while others could no longer afford their homes due to having mortgage loans that were substantially higher than the value of their homes and having sub-prime mortgage loans with teaser rates where after the initial fixed rate negative amortization period, the new adjusted payment doubled or tripled than their starter interest rate. With the real estate meltdown and credit and financial collapse, many home buyers during the real estate meltdown had the opportunity to purchase a home at rock bottom prices. Home buyers who purchased their homes in 2009, 2010, 2011, 2012, and 2013 have seen their home values rebound from the real estate market collapse and can now think about refinancing their current home loans and some can even do a cash out refinance loan. Home values have been increasing double digits in many parts of the country where many homeowners who had underwater mortgages are now above water and can see the light at the end of the tunnel and are not stuck in their homes for the rest of their lives and can sell or refinance their mortgages with a cash out refinance. Homeowners with equity can now consider a cash out refinance mortgage and use the proceeds for a variety of reasons. We will compare the FHA Cash Out Refinance Requirements Versus Other Loan Programs on this BLOG.
What Are FHA Cash Out Refinance Requirements
FHA has different rules and regulations on FHA refinance mortgage loans than other loan programs.
- FHA allows a rate and term refinance mortgage after six months from the date of the home purchase.
- To do a FHA Cash Out Refinance Mortgage Loan, the homeowner needs to wait one year from the closing of their home purchase.
- The maximum FHA cash out refinance amount is 85% loan to value with the main borrowers on the FHA cash out refinance mortgage note.
- You can have a non-occupant co-borrower on a FHA cash out refinance mortgage loan, however, the maximum loan to value amount is capped at 75% or less.
FHA Streamline Refinance: No Appraisal, No Credit, No Income
If you are a current FHA mortgage loan borrower and you want to do a FHA refinance but you have less than perfect credit and your income has greatly reduced and you have high debt to income ratios, you may be eligible for a FHA streamline refinance mortgage loan with no appraisal, no credit, and no income verification.
- The only requirement for a FHA streamline refinance mortgage loan is that you be timely on your mortgage payments for the past 12 months.
- One 30 day late payment in the past 12 months may be permitted but you cannot have been late on your mortgage payments in the past 90 days.
- All other derogatory credit and late payments on your credit report is overlooked.
- You do need a full time job, however, the income of your full time employment will not be verified and high debt to income ratios are ignored.
- FHA feels that since they originally underwrote and funded your mortgage loan, they do not need order a second appraisal since they have an appraisal on file and since you have been paying timely on your current FHA loan.
- You as the homeowner have proven yourself that you have been making timely payments and will continue to make timely payments.
Conventional Loan Refinance Versus FHA Cash Out Refinance Requirements
To do a conventional refinance mortgage after a home purchase, the homeowner needs to wait six months from the closing date of the home.
- With conventional loans, a homeowner can do a rate and term refinance or conventional cash out refinance mortgage after six months from the purchase date of the home.
- Maximum loan to value on a cash out refinance mortgage on a conventional loan is 80% loan to value.
- Many homeowners who have purchased their homes, especially in Illinois, Florida, Texas, Virginia, Georgia, Ohio, and California, with as little as 5% down payment do not realize that their homes have appreciated more than 20% in the past few years.
- Home values have appreciated double digits consistently in the past few years in many parts of the country and homeowners do not even realize this.
- Millions of homeowners who had underwater mortgages, this is when you owe more on your mortgage balance than the value of your home, thought that they were stuck in their home for decades to come but were shocked at how much their homes have appreciated and are no longer hostages in their homes and can now either do a cash out refinance or sell their home and either down size or buy a larger home.
- Fannie Mae and Freddie Mac are the two government sponsored enterprises, GSE, that set mortgage guidelines on Conventional Loans and homeowners can do a cash out refinance on a Conventional Loan up to 80% Loan To Value.
- Borrowers can do a rate and term refinance mortgage of 95% Loan To Value.
- Borrowers can refinance their FHA Loan to a Conventional Loan and Vice Versa.
VA Cash Out Refinance Versus FHA Cash Out Refinance Requirements
Borrowers who have a VA Certificate of Eligibility can do a 100% Loan To Value cash out refinance on a VA Loan. However, not everyone qualifies for a VA Loan. You need to be a veteran with a COE in order to qualify for a VA Loan. The Gustan Cho Team at CrossCountry Mortgage has no overlays on VA Loans.