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15Jul

Qualifications for FHA Cash-Out Refinance

The qualifications for an FHA cash out loan is very similar to a new purchase loan or an regular FHA loan. Since the borrower is receiving money back on their investment, the lender is required to run a new credit report and the requirements are still relevant for new and even repeat customers.

Age of Your Mortgage:

FHA Cash-Out Loans have an age requirement. There is no hard cap on this number, but the borrower had to own and occupy the property for 12 months prior to the case number assignment.

Credit Score:

FHA Cash-Out Loans require the borrower to follow the same guidelines with credit as they did for their current loan. Some things that could help you improve your credit score is to not apply for any new credit cards or other kinds of credit. These types of applications are known as inquiries and these inquiries affect your credit score. The more inquiries you have the higher the chance the lender sees you as a risk they're not willing to take. Knowing how your credit activity plays a role in your loan process is a huge help.

Loan to Value Ratio:

The maximum loan amount on an FHA refinance is 85% of the value of the home.  This is much more lenient than a conventional loan and generally allows borrowers to access the equity in their home sooner.   

Debt to Income Ratio:

The lenders task is to make sure you can afford this new loan. One of the ways they determine that is with your debt to income ratio. If you want to do an FHA cash out loan, start preparing in advance so you can reduce your debt and change your debt to income ratio in a positive direction and make it for the loan officer to decide. Often, you can pay debt off thru the transaction to help qualify.

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Grade My Mortgage

A FREE real-time "grade" of your mortgage.  Compares current market to your loan.

1

Amount

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Details

3

Your GRADE

Loan

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*Assuming FHA 30 Year Fixed

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Results

A Very Good.
B Good.
C Average.
D Refinance Now!

 

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FHA requires a Refi
HUD requires that FHA mortgages after June 2013 to refi in order to drop the PMI.
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