May 4, 2011
House hunters who purchase a home with an FHA mortgage loan may eventually decide to refinance the home to get a better interest rate, lower payments or to take advantage of the equity built up in the home. Many borrowers are curious about FHA cash-out refinancing options–does the FHA allow a cash-out refinancing option?
The answer is yes, but there are some conditions that apply. There are requirements on cash-out refinancing that may not apply to other types of refinancing loans. For example, a cash-out refinancing loan will be denied to borrowers who are delinquent on the mortgage or who have a record of delinquency within the last 12 months.
Borrowers with less than six months of payment history on the current mortgage will be turned down for cash-out refinancing, and any co-borrower on an FHA cash-out refinancing loan must be an occupant. Non-occupying co-borrowers cannot be added to a cash-out refinancing loan.
Borrowers are eligible for cash-out refinancing when they have made more than six months worth of payments on the property, are current on their payments, and who meet the lender’s credit qualifying criteria and any other FHA requirements associated with refinancing loans.
All cash-out refinancing transactions are credit-qualifying loans, meaning that unlike many FHA streamline loans, the borrower is required to apply with a credit and employment check the same way they did for the original note.
The FHA also has rules governing how much a cash-out refinancing loan can be for. In our next blog post we’ll discuss that issue, the exception provided for people looking to refinance inherited properties, and the rules covering refinancing former investment properties the owner now uses as a principal residence.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: