By:Dennis Norman
Dennis Norman
Effective April 1,2009,FHA will lower the amount you can borrow when refinancing your home loan if it is a “cash-out”refi. The term “cash-out”simply means you are borrowing more than your existing debt…thereby resulting in you getting “cash-out”of your home’s equity.
In the past FHA has allowed you to borrow up to 95% of the value on a cash-out refi but,effective April 1st,they will limit the loan to 85% of the value of your home.
Other requirements that FHA imposes on this type of refinancing include:
- 12 months of ownership- The subject property must have been owned by the borrower as his or her principal residence for at least 12 months preceeding the date of th loan application.
- Borrowers that are delinquent or in arrears under their current mortgage are not eligible.
- Second appraisal- A second appraisal is rquired on cash-out refinances that will exceed $417,000 and the property is in a declining area.
- Existing mortgage not required –Properties owned free and clear may be finance as cash-out transactions.
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