FHA cash out refinance loans are one of the most popular options when it comes to pulling equity out of your house. Whether you’re looking to consolidate debt, boost savings, get cash for investment purposes, or any other purpose, the FHA cash out refinance will be a viable option.
In this article we’ll explore the FHA cash out refinance guidelines, FHA cash out loan-to-value or LTV threshold, credit score requirements, and FHA cash out seasoning requirements.
FHA Cash Out Benefits
The FHA cash out refinance is ideal for borrowers that have under 699 FICO and want to pull out more cash than a Conventional refinance allows. Conventional cash out refinance loans only allow you to borrower 80% of your home’s value whereas FHA allows up to 85% LTV.
Conventional loans are very credit sensitive – meaning the interest rate is significantly higher the lower your scores - and cash out refinance rates are higher than interest rates for a traditional refinance or purchase. However, FHA cash out refinances offer similar rates as the FHA purchase mortgage, and FHA loans don’t penalize your rate as greatly even if you have lowermortgage credit scores.
One the many benefits to the FHA cash out refinance is the flexible guidelines compared to conventional cash out refinances. Here are a few of the items you need to be aware of in order to qualify:
No mortgage late payments within the last 12 months
Must pay off all mortgage liens as a part of a refinance (if you have a 1st and 2nd mortgage)
Property must be your primary residence
Minimum FICO down to 520, however borrowers generally need 560 or above to have a reasonable chance to have a mortgage approved.
No derogatory credit items currently in dispute such as charge offs, collections or previous late payments
Debt-to-income ratio must be below 57%. If you’re consolidating debt, we can use the FHA cash out proceeds to pay off some debt at closing, which means we do not have to count those payments against your debt-to-income ratio
No bankruptcies in last 2 years, and no foreclosures or short sales within the last 3 years
Must have reliable and verifiable income
FHA Cash Out Refinance LTV
FHA cash out refinances offer more flexible LTV (Loan-to-Value) compared to Conventional loans.
FHA loans allow up to 85% LTV, meaning that you to cash out as much equity as you’d like up to 85% of your home’s appraised value, assuming the loan amount Is BELOW FHA county loan limits.
For 2019, FHA count loan limits are capped at $314,817 for most counties throughout the US, however, there are some high cost counties where loan amounts may be significantly higher.
Your mortgage lender will help you line up and order an appraisal to determine the value of your home.
FHA Cash Out Credit Score Requirements
FHA cash out refinance loans allow credit scores down to 520. Borrowers with higher mortgage credit scores will get better interest rates and likely have a better chance of having their loan approved.
Many FHA cash out lenders cannot lend below 580 credit, but here at United Fidelity Funding we do offer FHA cash out refinance loans with lower credit scores.
However, having a score above 580, and ideally above 620, will give you the best chance at getting a cash out refinance loan approved.
FHA Cash Out Refinance Seasoning Requirements
Due to some new Ginnie Mae securitization rules put in place to make sure lenders aren’t “churning” loans (offering loans that lack real benefits to borrowers), there are seasoning requirements (or waiting periods) in place before you can qualify for an FHA cash out refinance.
210 days must have passed from the closing of your last loan to the date the FHA cash out refinance case number is registered
Borrower must have made at least 6 payments on their existing mortgage
6 full months must have passed since borrower’s first payment was due. For example, if your first payment was due in January, you’d be eligible in July
Use United Fidelity Funding for your FHA Cash Out Refinance
United Fidelity Fundingis an FHA-approved lender licensed to lend in multiple states throughout the US. With an average of 7 years in the industry and 400 funded loans, our licensed loan officers are highly experienced with FHA, Conventional and VA cash out refinances.
In addition to our 5-star service (as rated by our past clients on sites like Zillow and LendingTree), our core focus is keeping our company overhead low, thereby allowing us to have some of the most competitive rates and lowest fees for our borrowers. Superior Service. Excellent Rates. No Surprises.
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