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Texas Cash-Out Refinance Home Mortgage Lending Guidelines

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Texas Cash-Out Refinance Home Mortgage Lending Guidelines

This BLOG On Texas Cash-Out Refinance Home Mortgage Lending Guidelines Was Written By Michael Gracz of Gustan Cho Associates Mortgage News

Taking cash out of your home, whether it’s a refinance or a home-equity line of credit can be very confusing.

  • You’re going to want to make sure to contact a licensed loan officer who has completed many of these transactions
  • At Gustan Cho Associates at Loan Cabin Inc. we do specialize in Texas refinancing!
  • Our licensed loan officers will assist with cash out or rate and term refinances
  • This blog will explain the ins and outs of obtaining a cash out loan in Texas, or Texas (a)(6) loan
  • Laws have changed over the past few months which only blurs the lines further
  • The rule of thumb when it comes to Texas (a)(6) refinancing is you must keep at least 20% of equity in your home
  • This only applies to your primary residence
  • If you own investment property or second home in Texas the (a)(6) rule does not apply
  • Let’s focus on your primary home
  • The maximum loan amount for a cash out refinance in 2018 is $453,100 for the entire state

Case Scenario On Texas Cash-Out Refinance Home Mortgage

Let’s take a moment and go over an example:

  • If your primary home is worth $300,000, the maximum loan amount will be $240,000
  • Texas (a)(6) law prohibits any dollar amount above 80% loan to value

In this example the pay off amount of your existing lien plus closing costs must be lower than $240,000.

  • First mortgage = $175,000
  • Closing Costs = $3,000
  • Cash out needed =$25,000
  • Total = $203,000
  • Since that amount is under $240,000 or 80% LTV- you will pass Texas (a)(6) equity requirement

The rules used to be “once cash out, always a cash out” but those days have changed. In the year 2018,

  • Texas has changed some laws such as lowering the 3% fee cap Down to a 2% fee cap
  • This was put into place to protect borrowers from predatory landing
  • Texas borrowers are now able to complete re-financing as rate and term transactions even after obtaining a Texas home equity loan
  • Now called Texas (a)(4)
  • This is a huge advantage for folks trying to obtain a lower interest rate, because cash out loans typically do have a higher interest rate than a rate and term refinance
  • With this new rule many borrowers can take advantage of obtaining lower interest rates
  • The demand for cash out refinancing his seems to be raising with the increasing property values throughout the state of Texas

What Makes Texas Cash-Out Refinance Home Mortgage Different

Texas established the (a)(6) laws, mainly the 20% equity requirement to prevent borrowers from equity stripping their property.

  • They have also created a minimal timeframe requirement before you refinance your home again
  • That timeframe is 12 months, meaning once you obtain a Texas cash out refinance, you may not enter another cash out refinance for at least 12 months from your first payment
  • This is also true about competing a rate and term refinance

Special Texas Cash-Out Refinance Home Mortgage

A bulk of the confusion for Texas cash out refinancing comes from loan products are available.

  • A Texas (a)(6) loan will be a conventional loan, 100% of the time
  • Due to the laws you may not enter an FHA or VA cash out refinance in the state of Texas
  • The reason behind this can be unclear
  • Those loan programs allow you to take out more than 80% or the value of your home, or loan to value (LTV)
  • More specifically an FHA cash out refinance allows you to refinance up to 85% of the value of your home, and VA loans even higher
  • 100% LTV! It seems logical that you would be able to use these long products and only go up to 80% loan to value, but unfortunately that is not allowed as of this time
  • This does not help for borrowers who have entered into a bankruptcy or have had housing issues in the past

Rules And Regs On Texas Cash-Out Refinance Home Mortgage

There are thousands of borrowers in the state of Texas to feel left in the dark because they don’t qualify under conventional guidelines, there is hope. Texas Cash-Out Refinance Mortgage:

  • At Gustan Cho Associates we do have a full line of NON-QM loans available
  • These are designed for borrowers who do not fall into the conventional realm
  • These loans are available without seasoning requirements for housing events such as a foreclosure, short sale, deed in lieu, or even late payments on a mortgage
  • There are also shorter waiting periods after a Chapter 7 and Chapter 13 bankruptcy
  • These loans still follow the Texas (a)(6) timeframe requirements and will not allow you to cash out above 80% of the value of your home
  • There are many products available for self-employed borrowers looking to take cash out of their properly
  • The beautiful thing about these loan programs is, you are always allowed to refinance out of them once you have met your seasoning requirements and meet the eligibility to enter into conventional financing

This BLOG On Texas Cash-Out Refinance Home Mortgage Was written and published by Michael Gracz.

Michael Gracz is a contributing editor at Gustan Cho Mortgage News and the National Sales Manager for Gustan Cho Associates.

Contact Mike Gracz at 630-659-7644 for further questions and to start your application today.

Please see the NON-QM blog soon to come.

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