FHA Cash Out Refinance Loan
The FHA cash-out refinance option is perfect for homeowners who are looking to pay off their existing mortgage, and use their home’s stored equity for extra cash. This process depends on how much equity you’ve built up in your property as it’s limited to 80% of the home’s current appraised value. As long as you qualify for the new FHA mortgage, you can use the cash out however you like.
For example, if the home appraises for $300,000, the homeowner can cash out up to $240,000 minus their existing loan balance. If they currently owe $175,000, they would have access to approximately $65,000 cash out.
The FHA Cash Out Refinance is a great option to help homeowners pay off high interest debt, remodel or renovate the house or even invest in rental properties. This program allows credit challenged borrowers a way to affordably access the equity in their home.
FHA Cash OUT Refinance Guidelines
To qualify for an FHA Cash out Refinance, a homeowner will need to meet FHA guidelines as well as any additional lender guidelines. Keep in mind that FHA only insures the loan against default and does not lend money directly. This is why you will often find conflicting information regarding FHA guidelines when seeking a lender’s approval. The lender can determine their own guidelines for approving FHA loans and these guidelines are called lender overlays.
Credit Score Requirements – The FHA guidelines say that you need a minimum credit score of 580 to qualify for a cash-out refinance, but most lenders set their own minimum credit scores. Most lenders require at least a 620 score but at Michigan Mortgage Solutions we have lenders that will provide approvals all the way down to 580.
Debt to Income Requirements –
Payment History Requirements – To qualify for an FHA Cash-Out Refinance the borrower must have no more than one 30 day late mortgage payment in the past twelve months and none in the past six months.