FHA Home Loans - Cash Out Refinance Loans
A “Cash Out Refinance Mortgage” is exactly as it sounds. This loan is used when an individual looks to refinance an existing mortgage and seeks to get a cash amount back, typically over $2000 after closing. This program is only available to you if your property is worth more than what’s owed, or when your refinance situation includes consolidation of a second mortgage (or home equity line) that is under a 1 year old.
FHA Home loan programs allow cash out mortgage refinancing of only owner occupied real estate. A major benefit of this FHA loan program is the fact that the maximum cash back can't top 85 percent of the total appraisal, whereas with a conventional loan you can only get 80 percent.
Some of the common uses for the FHA Loan’s Cash Out Programs are:
- Home Renovations
- Debt Consolidation
- Education
- Emergencies
- Investments
- Vacations
The cash out from your refinance mortgage can be used for any of the following:
- Home Improvements
- Bill Consolidation (and mortgage if second is less than 1 year old)
- Large Purchases
- Schooling
- Vacation
- Investment(s)
Another advantage of this program over convention loans is if you have had prior credit problems, there isn't a FIC score requirement. FHA Loans are less stringent on past credit issues in comparison with convention loans:
- Only 24 month after a bankruptcy vs. 36 months with a conventional
- 36 months after a foreclosure vs. 48 months with a conventional
Another important benefit of this program is that individuals can use the cash out refinancing for single family units all the way up to fourplex unit properties.
A common misconception about this FHA loan is that you need to have an existing FHA home loan to do cash out refinance. This is simply not true! If you meet the FHA Loan Requirements you will be eligible for this program.
