The FHA Expert

FHA refinancing cash-out -- knowing your options -- Part 1 of 2

FHA has a "cash-out" and a "no cash-out" refinance. There is are few major advantages when applying for a FHA cash-out refinance than possibly doing a conventional cash-out refinance.  All scenarios are for primary residences only.

 

 

                                                 

FHA CASH-OUT	CONVENTIONAL CASH-OUT
Up to 95%   of the value of your home  -- 95% LTV	Up to 90%   of the value of your home  --  90% LTV
No hits on   pricing on cash-out	¾ of a   point hit up to 90% cash-out
Monthly mortgage   insurance is .50% of loan amt	Monthly   mortgage insurance is .52% of loan amt
Subordinate financing may take place & can exceed the CLTV of 90%. CLTV = total combination of 2 loans divided by the value of your home. A 1st   & 2nd mortgage. The CLTV can be over 100% as long as the   borrower qualifies with income for both loans.	Subordinate   financing cannot exceed 90% CLTV.

 

 

FHA 95% cash-out guidelines :

• The property secured can only be 1 -2 unit properties.
• You must own the home for 12 + months.
• You can not have any 30 day late in the last months. Even if it is approved through FHA score card. No exceptions. But you can do up to 85% financing with lates on your mortgage less than 12 months.
• Any co-signer or co-borrower added to the note must be living in the property as a primary borrower.

 

FHA 85% cash-out guidelines :

• The property secured can be 1 - 4 unit properties.
• Properties acquired by inheritances within the last 12 months are eligible for this type of refinancing. The lender must document the acquisition by showing the borrowers inheritance.
• If the property was purchased less than a year ago, the 85% LTV is based on the purchase price and not the new appraised value.

 

 

Tip : Your cash out mortgage in todays market could be very beneficial. Especially with rates still low, you can liquidate you equity and use the money in other financial vehicles to earn more money. "Don't work for your home, ,make your home work for you."  This is what is described as financial planning. Seek a mortgage professional that understands your needs and goals, who understands the market, and who can put all of this together to allow you financial freedom.

FHA mortgages, how many can you have?

After having a brief conversation with Thesa Chambers earlier today in regards to First Time Homebuyers and FHA, she told me that I should write about this. She thought FHA was only for first time homebuyers. This is far from the truth and this has nothing to do with Thesa and her knowledge of real estate. She is great at what she does and how she helps her clients buying or selling in the Sunriver, Bend, La Pine, Oregon areas.

FHA mortgages can be used over and over and over. The two major questions that are sometimes overlooked by loan officers when first screening the consumer is :

1. Do you own or have you sold other real estate in the past 60 months on which there was a HUD/FHA mortgage?
2. If so, is it to be sold?  ( and if it is to be sold, the requirements below don't count then)

This is extremely important because FHA has guidelines when it comes to owning another property that has a FHA/HUD mortgage on it. So, what does FHA look at and how can one be disqualified? Your FHA mortgage has to follow everything below. You can't mix and match some of these requirements.

• One of the properties has to have 25% equity in the property. No matter if it's your current property that you own or the one that you are buying.

• The next home that you buy with a FHA loan has to be at least 50 miles apart from your current FHA mortgage. This use to be an older rule. Now?  It has to make sense. Typically some distance.

• And that you typically have to be moving up in home value, not down. Usually a growing family is a good reason.
  

 

  These are the basic guidelines and rules when buying a home with a FHA mortgage. You might be asking yourself why this is important and why HUD is adamant when it comes to these guidelines. Because FHA is very lenient when it comes down to down payment, credit, and qualifying ratios. And they want to keep investors from obtaining homes under these relaxed guidelines.

FHA Buyers..... get ahead of the buying game of your new home!!!!!

Are you seriously shopping for a house?  It doesn't matter if you have done this before or even if you are a first time homebuyer.

If you have bought before, don't think it's the same way as once before. The market changes every day. Mortgage programs can change at the blink of an eye. First time home buyers, just because your friend or family member had an easy time when they bought their house doesn't mean that it could be as easy and or simple as their purchase.

The number one rule of advice, try and get a referral of a good loan officer before you head out into that jungle. You want someone that is going to take the time to educate you while giving you options and not someone that is worried about their own pockets. Make the effort to obtain a pre-approval.

What is a pre-approval? It's one step ahead of being pre-qualified. This is a must read. The difference between a Pre-Approval and a Pre-Qualification letter. For a short breakdown of this article, a pre-approval is worth a hole lot more in most cases than a pre-qualification. You actually go through the process of buying a home without having a home in mind and or contracts. Why is this a good choice?

• -- Right now, it's a buyers market for the most part. If you place almost the same bid on a property, but your did/offer is accompanied by a pre-approval letter instead of a pre-qual letter, you might have a better chance. (I have had clients in the past whose offer was slightly lower, but it was still accepted because they were approved already) There are many reasons why for this.
• -- Many programs have been changing as of lately and it's a good idea to see what you can be approved for now instead of later.
• -- If you are a buyer that doesn't have much money to work with and possibly average credit, you might need 100% financing. This can only be approved by an online service and not by the naked eye. Better to know now than later.

Overall, understanding your options and how the financing process takes place is the most common mistake made amongst buyers. No, I am not saying that you need to be an expert. But why not become slightly educated on how the process works? Why not be one step ahead of everyone else.

Conclusion :  What I am about to state is from experience and past clients. This just happened again as of today. Keep these next few thoughts in the back of your mind as you seek a professional in the mortgage industry.

• Don't fall for those that don't spend much time with you asking you questions and your goals. This is so key.
• Watch out for someone that acts as a true sales person. Someone that uses such words as or phrases as : "I promise", "I guarantee", "don't worry", "not a problem", ...and some of the worst? "I am the lowest", "I have the best rates and or fees".... and "TRUST ME".
• Don't fall for someone that says they will take care of you just because they are a manager or possibly the owner. They shouldn't have to use their title to make you feel comfortable or like you will get a great deal. This is sometimes called sales.
• A good faith estimate that is actually missing lots of information or figures if you are shopping this form.
• A good faith estimate that is partially hand written and the rest typed in.

Overall, use your gut feeling at times. Don't be afraid to ask many questions. And if you get someone that is hard to reach, this could be a red flag. Especially once you start the process with that loan officer. If they were easy to reach prior to application, but now don't return calls or e-mails like they did in the beginning... BIG RED FLAG.

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

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