In this blog, we will cover and discuss HUD cash-out mortgage guidelines on FHA loans. Home values are rising throughout the country. Many folks who purchased their homes a few years ago are enjoying the double-digit appreciation. Some families do not realize their homes have increased in value by 20% to 30% or more. FHFA has increased conventional loan limits to $647,200 for 2022. This increase by FHFA is the third increase for three years in a row on conventional loans.

Why FHA and Conventional Loan Limit Increasing For the Past Six Years

The reason for the increase is due to rising home prices for three years in a row. HUD, the parent of FHA, also increased the 2022 FHA loans limit to $420,680. Again, HUD normally follows the FHFA loan limit increase and has done so for the past three years. The increase in FHA loan limits helps homeowners get more money when doing cash-out refinance. Per HUD Cash-Out Mortgage Guidelines, homeowners can get up to 85% LTV on FHA Loans.

HUD Cash-Out Mortgage Guidelines Allows 80% LTV

Per HUD Cash-Out Mortgage Guidelines, homeowners can get cash-out up to 80% loan-to-value on FHA loans. This allows homeowners with equity in their homes to pay off their outstanding current mortgage balance and have cash proceeds up to 80% of the value of their homes. The new loan will be an FHA loan. HUD Cash-Out Mortgage Guidelines allow borrowers to use the excess cash proceeds for any purpose they want. It can be used to pay outstanding debts.

Proceeds From Cash-Out Refinance Tax-Free

Proceeds from cash-out refinance mortgages are tax-free. Homeowners do not have to pay taxes from any proceeds. Homeowners can use proceeds for any purpose they seem fit. Higher interest credit card payments, auto loans, installment loans, and student loans can be paid. By doing so, they can save tens of thousands of dollars. They can also utilize the tax benefits of their mortgage interest paid from their new FHA loan. Homeowners who are drowning with overwhelming higher interest monthly debts can benefit from a cash-out refinance FHA mortgage. Others may benefit from the cash proceeds to do much-needed home improvements to their homes. Yet others may want to use the proceeds to take a vacation, pay for children’s weddings, or investments.

Paying High Interest Credit Cards With Proceeds From FHA Cash-Out Refinance

The greatest benefit for homeowners with equity in their homes to do a cash-out refinance mortgage is to pay outstanding high-interest debts. Statistics prove that over 80% of American workers live paycheck to paycheck. A large percentage of American workers do not have more than three months of reserves to be able to pay their monthly bills. Most workers will find it impossible to pay outstanding credit card balances. They often struggle with making the bare minimum monthly credit card payments with very high interest. Car payments are high monthly expenses due to the shorter amortization term.

Credit Card Debt By American Consumers

Most Americans have credit card debts with high interest.  Credit card interest rates vary from a low of 9.99% to 29.99%. The average APR on average revolving credit cards is 15.98% according to the Federal Reserve Board. Federal Reserve Board estimates that revolving credit balances are $1.04 trillion. The American Bankers Association claims that 44% of account holders keep a monthly credit card balance every month. Consumers normally just pay the bare minimum payment due. Cash-Out Refinance Loans may be the perfect solution to pay outstanding credit card debts with double digit interest.

HUD Cash-Out Mortgage Guidelines And Qualification Requirements

Gustan Cho Associates is a mortgage company licensed in 48 states with no overlays on government and FHA loans. We just go by HUD Cash-Out Mortgage Guidelines and have no additional overlays. Here are the basic HUD Cash-Out Mortgage Guidelines required by homeowners:

• There are no net tangible requirements on cash-out mortgages per HUD Cash-Out Mortgage Guidelines
• Maximum loan to value is capped at 80% LTV
• The maximum debt to income ratio to get AUS Approval is 46.9% front end and 56.9% back end DTI
• The higher the borrower’s credit scores the lower mortgage rates
• Credit scores down to 500 FICO and AUS Approval
• A New FHA loan would be 80% of appraised value
• Plus FHA upfront mortgage insurance premium (MIP)
• Timely payments in the past 12 months with all credit tradelines
• Manual Underwriting available

HUD Cash-Out Mortgage Guidelines On Manual Underwriting

HUD Cash-Out Mortgage Guidelines allow manual underwriting. Borrowers in an active Chapter 13 Bankruptcy Repayment Plan can qualify for FHA Loans under manual underwriting. With the proceeds, they can pay outstanding Chapter 13 debt and get their bankruptcy discharged earlier than later. 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. Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.