HUD Cash-Out Guidelines Changing To 80% LTV On FHA Loans

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This ARTICLE On HUD Cash-Out Guidelines Changing To 80% LTV On FHA Loans Was PUBLISHED On August 25th, 2019

what are the HUD Cash-Out Guidelines Changing To 80% LTV On FHA Loans

The United States Department of Housing And Urban Development (HUD) is the parent of FHA. FHA is not a lender.

  • The Federal Housing Administration is a government agency
  • The role of FHA is to insure and partially guarantee lenders in the event if a borrower defaults and forecloses on their FHA loans
  • Due to this government guarantee, private lenders can offer lower down payment options to homebuyers with less than perfect credit scores at low mortgage rates
  • FHA loans are one of the most popular mortgage programs in the United States
  • FHA loans are for purchase and refinance
  • Starting September 1, 2019, HUD Cash-Out Guidelines will be limited to 80% LTV.
  • HUD Cash-Out Guidelines on loan to value will get lowered to 80% LTV from the current 85% loan to value

In this article, we will cover and discuss HUD Cash-Out Guidelines on FHA Refinances.

Reason For HUD Cash-Out Guidelines Changes

what are the Reason For HUD Cash-Out Guidelines Changes

Due to the 85% LTV HUD Cash-Out Guidelines, many homeowners enjoyed doing cash-out refinances on FHA Loans with the recent surge of home values in recent years.

According to U.S. HUD Secretary Ben Carson:

An increase in cash-outs poses a potential future risk for us but also challenges the core tenants of FHA’s taxpayer-backed mission. To say the least, we feel that the level of cash-out refinancing is getting risky. Thus, the drop from 85% to 80%. Many have forgotten that in 2009, FHA had reduced the cash out limits from 95% to 85%. Even though FHA is reducing the cash-out limit to 80%, it is not taking away the FHA MIP requirement!

Does The New HUD Cash-Out Guidelines Require FHA MIP?

Does The New HUD Cash-Out Guidelines Require FHA MIP?

With conventional loans, private mortgage insurance (PMI) is not required on loan to values at 80% LTV or lower.

  • Do the new HUD Cash-Out Guidelines require FHA mortgage insurance premium if the LTV is 80% or less?
  • All FHA mortgages mandate a one time upfront FHA MIP of 1.75% and an annual FHA MIP of 0.85%
  • FHA MIP is mandatory on all 30-year fixed-rate FHA Loans
  • If borrowers are borrowing with 10% down payment and/or 90% LTV, FHA MIP can be canceled in 11 years
  • Over 90% LTV, then the FHA MIP is required for the life of the 30-year FHA loan term
  • The 80% LTV is for cash-out refinances only

Borrowers can have higher loan to values on FHA Streamlines, rate and term loans, and FHA purchase loans.

HUD Cash-Out Guidelines Versus Other Loan Programs

what are the HUD Cash-Out Guidelines Versus Other Loan Programs

HUD Cash-Out Guidelines is now capped at 80% LTV starting September 1st, 2019.

  • The Department of Veterans Affairs (The VA) recently followed HUD’s lowering on FHA cash-out mortgages and lowered VA cash-out LTV to 90% from the previous 100 LTV cash-out guidelines
  • Fannie Mae and Freddie Mac limit loan to value up to 80% on owner-occupant primary residence conventional loans
  • Cash-out refinance guidelines on conventional loans on two-unit properties is capped at 75% LTV. Second homes are capped at 75% LTV
  • Rental properties on cash-out conventional loans are 75%
  • Two-unit rental cash-out refinances are capped at 70% LTV

Private mortgage insurance is not required on conventional loans if the loan to value is at least 80% LTV.

For more information about the contents of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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