UPDATE : August 23, 2008 -- Cash Out Mortgages - FHA loans vs Conventional loans - Part 1
FHA has a "cash-out" and a "no cash-out" refinance. There is are few major advantages when applying for a FHA cash-out refinance than possibly doing a conventional cash-out refinance. All scenarios are for primary residences only.
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FHA CASH-OUT |
CONVENTIONAL CASH-OUT |
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Up to 95% of the value of your home -- 95% LTV |
Up to 90% of the value of your home -- 90% LTV |
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No hits on pricing on cash-out |
¾ of a point hit up to 90% cash-out |
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Monthly mortgage insurance is .50% of loan amt |
Monthly mortgage insurance is .52% of loan amt |
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Subordinate financing may take place & can exceed the CLTV of 90%. CLTV = total combination of 2 loans divided by the value of your home. A 1st & 2nd mortgage. The CLTV can be over 100% as long as the borrower qualifies with income for both loans.
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Subordinate financing cannot exceed 90% CLTV. |
FHA 95% cash-out guidelines :
- The property secured can only be 1 -2 unit properties.
- You must own the home for 12 + months.
- You can not have any 30 day late in the last months. Even if it is approved through FHA score card. No exceptions. But you can do up to 85% financing with lates on your mortgage less than 12 months.
FHA 85% cash-out guidelines :
- The property secured can be 1 - 4 unit properties.
- Properties acquired by inheritances within the last 12 months are eligible for this type of refinancing. The lender must document the acquisition by showing the borrowers inheritance.
- If the property was purchased less than a year ago, the 85% LTV is based on the purchase price and not the new appraised value.
Tip : Your cash out mortgage in todays market could be very beneficial. Especially with rates still low, you can liquidate you equity and use the money in other financial vehicles to earn more money. "Don't work for your home, ,make your home work for you." This is what is described as financial planning. Seek a mortgage professional that understands your needs and goals, who understands the market, and who can put all of this together to allow you financial freedom.
FHA programs and insight :
The First Time Homebuyer Series :
- First Time Homebuyer Tips : FHA, is the best mortgage program? -- Best Programs & Why -- Part 3 of 4
Buying Tips :
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For more information on FHA cash out refinancing, please go to this link. The FHA Expert
For more information on how you can obtain your dream home, please click here : Mortgage Financing Options
Kim.... again, great minds think alike. ;o) thanks for the compliment.
Marlene..... the problem here is that you can't go over a 90% CLTV on conventional deals. There are other cash-out programs that can go above 90%, but the rates will be much higher. And by making this statement, just means that it's much cheaper to go FHA if you want to cash-out above 90%.
I have a client right now with 700 credit scores and excellent credit and he wants max cash out, but keeping the rate low enough because of the FHA loan.
Margaret...... yes, I am licensed in MD. I am actually licensed in 24 states. I can do loans from CT all the way down to Florida, excluding D.C. What's weird is that I still can't add you as an associate. I don't know why not. Been trying for 3 months now. lol Thanks for asking.Jeff,
I am doing two of these right now, I dealing with some DTI issues, but I think we will be fine, they can have Co Signers too...
Tom Weiss
It was a long time before I knew this could be done..... because my preferred a-paper/gov lender wouldnt do them.
In addition to the maximum ltv of 80% on cashouts in Texas, I seem to remember that there are some other wierd Texas rules..... I guess I will cross that path when I get one of these.
Good post Jeff
Margaret..... yes, about time. ;o) And thanks for your feedback again. Looking forward to talking to you some more.
Gary..... thanks for the polite compliments and I am glad that your show went well.
Tom W. ...... what did you find out about the co-signers on the 95% part. I never heard back. thanks
Tom B. .......... I know Texas is a lot different when it comes to cash-out. I never did ask or find out why. I hate when the state steps in like this. Gee, at least make it 90%.....
Pete........ there should have always been more demand for this. FHA cash-out up to 95% has been out for a few years now. I just wonder how many actually went the subprime route, when this way would have been extremely cheaper. thanks for the kind words.