* Note: The FHA cash out refinance does not follow the same guidelines as the FHA streamline program. If you do the FHA Cash Out Refinance, you will need to get fully qualified for the new finance amount.
The FHA cash out refinance was created to allow home owners the ability to borrower against the equity of their home. FHA will insure cash out refinances up to 95% of the home’s current appraised value. Simply put; if your home appraises at $100,000 and you owe $70,000, then when you get an FHA cash out refinance you’ll borrow $95,000 to pay off the original $70,000 and keep $25,000 for yourself before taking out any closing costs.
Benefits of an FHA Cash Out Refinance
- No minimum FICO Score requirements.
- There are no regulations on what you spend the cash on… It’s your money– do with it what you like.
- You can get loads of cash at a low rate.
- Refinance up to 95% of the appraised value on your current residence– this is 5% greater than any other kind of cash out refinance.
- Refinance up to 85% of the appraised value of other property types.
- You can get a FHA cash out refinance 2 years after a bankruptcy and 3 years after a notice of default.
How the Cash Out Process Works
A refinance transaction involves paying off an existing real estate debt from the proceeds of a new mortgage. The lender must provide a payoff statement in the case binder. For all refinance loan transactions, the borrower will not be required to make or bring the current months payment due to closing, nor will be the principal balance of the existing loan be reduced by the amount of that unpaid principal.
1. In order to get up to 95% Loan to Value, the borrower/s must have lived at the residence for at least 12 months.
2. If the property is encumbranced by another mortgage, the home owner/s must have made on-time payments for at least the last 12 months.
3. Subordinate financing may remain in place, but subordinate to the FHA insured first mortgage– regardless of the total indebtedness or combined loan-to-value ratio– provided the homeowner qualifies for making scheduled payments on all liens.
4. Any co-borrower or co-signer must be an occupant of the property.
5. If you have made 1 or more 30 day late payment on your current mortgage within the last 12 months you’re not eligible for the 95% cash out.