In this article, we will cover and discuss non-QM cash-out guidelines on non-QM mortgage loans. Gustan Cho Associates is excited to introduce a new non-QM cash-out refinance loan product. There has been a lot of industry news surrounding cash-out refinancing in the year 2022. In this blog, we will detail some of the recent changes, our new cash-out loan program, and how to apply for a cash-out refinance with Gustan Cho Associates. In this article, we will cover and discuss Non-QM Cash-Out Guidelines On Residential Non-QM Mortgages.
Changes In VA Cash-Out Refinance Guidelines on VA Home Mortgages
In the calendar year of 2022, many agencies changed their guidelines around cash-out refinance mortgages. The U.S. DEPARTMENT OF VETERANS AFFAIRS announced the standard cash-out refinance loans will be capped at 90% loan to value (LTV). This is a 10% reduction from the old guideline, where the veteran could cash out to the full value of their property, 100% loan to value.
VA Guidelines on 100% LTV Cash-Out Refinance on VA Loans
This is the second recent guideline change for VA cash-out mortgages. The older guideline allowed the veteran to cash out up to 100% of the value of their home and then add the funding fee to that amount creating a combined loan-to-value of 103.3%. The great news is Gustan Cho Associates can still do a 100% cash-out refinance on VA loans.
Updated HUD Cash-Out Refinance Guidelines On FHA Home Loans
THE FEDERAL HOUSING ADMINISTRATION or FHA has also reduced their maximum loan-to-value threshold down to 80%. This is a 5% reduction from the old guideline that was in place for almost 10 years. These reductions are put in place to prevent the American people from equity stripping their properties. BEN CARSON is the current Secretary of HUD and he believes this new rule will reduce risks of cash-out refinancing on Government-backed loans.
Reason For Lowering Loan To Value By Federal Agencies
When we see two major sectors of the mortgage industry change their guidelines in the same calendar year, that is usually a sign of what is to come. Conventional mortgages have had an 80% maximum loan to value limit for cash-out refinance and put in place for some time now. FHA has followed suit and the VA has lowered their maximum value required to help protect our veterans.
Building equity in a home is part of the American Dream. A mortgage is meant to be a long-term financial instrument to build wealth. Completing a cash-out refinance takes the equity out of your home. These new guidelines help keep a larger portion of equity in the homes of the American people.
Agency Versus Non-QM Cash-Out Guidelines
After the FHA announcement to lower the loan to value requirements from 85% down to 80%, we saw an uptick in applications for FHA cash-out refinance. Many Americans wanted to utilize the extra 5% before it went away. The good news is Gustan Cho Associates have just rolled out a new cash-out program that still allows 85% loan to value!
Non-QM Cash-Out Guidelines on Loan-To-Value
85% LTV Non-QM Cash-Out Guidelines On Residential Non-QM Mortgages. That’s right, Gustan Cho Associates have added a new loan program available through one of our investors that allows Americans to refinance their property up to 85% loan to value. Just like the good old days with an FHA cash-out refinance.
Other Non-QM Cash-Out Guidelines and Requirements
This product has a few expanded requirements. We will go over those below:
- 620 minimum credit score
- MAX DTI is 50%
- Full documentation (W2’s, Tax Returns, Pay Stubs)
- Bank Statement Income Allowed (24-month bank statements used to calculate self-employed income, higher rates usually apply)
- Primary Residence ONLY
- Property Types – Single Family Homes, Condos, Non- Warrantable Condos, 2-4 Unit Condos, or Townhomes, NO MANUFACTURED HOMES
Non-QM Cash-Out Guidelines and Eligibility Requirements
A few other exciting features of this loan program include
- Cash-out funds may be used to meet reserve requirements
- This is NOT the case with FHA, VA, or Conventional cash-out refinances
- With this 85% LTV loan, you may utilize the cash proceeds to pay off the remaining balance of a Chapter 13 bankruptcy
- Meaning you can use this loan to end your chapter 13 bankruptcy repayment plan
- Your home may NOT be listed for sale within the past 6 months of refinancing application date
If the home is listed for sale within this timeframe, you will be capped at 75% loan to value.
Documents Required To Start Mortgage Process
If you are reading this article, chances are you were interested in a cash-out refinance to the maximum loan to value threshold. How would you apply for this new loan product? Applying for this loan is no different than applying for your everyday conventional or FHA mortgage product. First, you will call Mike Gracz and 630-659-7644 or send an email to mgracz@gustancho.com. Once you contact Mike, you will be paired with a licensed loan officer in your state. Your loan officer will send you an application link, which will allow them to start the process and pull your credit. You will send the following information:
- Last 30 Days of Pay Stubs
- Last Two Years Tax Returns
- Last Two Years W2 or 1099s
- Mortgage Statement
- Homeowners Insurance Policy
- Driver’s License
Once your loan officer is able to approve the documentation you have sent in, a full loan disclosure package will be sent to you.
Non-QM Mortgage Process
After you complete the electronic signatures and send back a few ink signed pages, your appraisal will be ordered. For any refinance loan, the appraisal is the most important part of the transaction, the appraisal will tell the lender the value of your property. We can go up to 85% of the appraised value of your property. While the appraisal is being completed, your file will be underwritten.
Underwriting Process on Non-QM Loans
The underwriter will tell you what items if any are needed to approve your refinance. Once the lender has received your appraisal, the title work, and the documentation requested from you, you will then close on your refinance. Since this loan program is only allowed on a primary residence, there is a three-day right to rescission. Before your refinance will fund. Once your loan is funded, everything is official, and your new loan is live.
Qualifying For Non-QM Mortgages With A Direct Lender With No Overlays
Gustan Cho Associates are always looking for new loan programs that can help our clients. This Cash-out refinance product came at the best time possible. FHA and VA have lowered their maximum loan to value thresholds. That additional 5% can help a struggling family pay off consumer debt. There are many reasons families complete a cash-out refinance. To discuss all your refinance options, please call Mike Gracz on 630-659-7644. We are experts in mortgage refinancing.
October 25, 2022 - 5 min read