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FHA Cash-out Refinance Benefits

The Federal Housing Administration (FHA) has guidelines for mortgage refinance loans that are a bit looser than conventional mortgages. Actually, there is no such thing as an FHA loan. The FHA does not fund mortgages, what it does do is provide mortgage insurance that guarantees that the lender receives the full loan balance if the borrower stops making monthly payments.

When the FHA backs a loan, lenders are more likely to provide the requested funds. An FHA approved loan will allow a person to get a mortgage even if that person could not qualify to obtain a conventional mortgage loan.

At the end of the cash-out refinance process, the borrower will receive more than $2,000 cash back as a funding source to help with debt consolidation, take a vacation or to do some much-needed rehabilitation work. Homeowners who presently do not have an FHA loan also qualify for the cash-out refinance through the FHA loan program.

An FHA cash-out refinance loan will fund up to 95% of the appraised value of the home, which is higher than conventional loans. However, recently enacted rules state that as of January 1st, 2009 all FHA loans with loan-to-values over 85% must have a second appraisal. This is only required on FHA loans with LTV�s of 85 to 95%. This makes FHA cash-out refinances a little more expensive to the borrower but the decision to do a cash-out needs to be weighed against the benefits. Contact an FHA lender (click here) and discuss all the options. LTV however is not the only criteria for consideration. The borrower also needs a consistent source of income. FHA will approve the loan when they are sure that all of these criteria are in order.

The FHA does not require that the FICO credit score meet any minimum requirements, however most lenders at this point have instituted there own rule. Typically 580 is the minimum credit score allowed but it can vary by lender. Again, contact and FHA lender who can help you with this determination. This is a benefit for those applicants with less than pristine credit. It allows those borrowers with credit issues to embrace this refinance opportunity.

This is a good time to apply for the FHA cash out refinance mortgage because some of the guidelines are sure to tighten in light of the current economic environment.

Written by Jeff Onofrio- www.whatisYourRate.com Jeff is an FHA mortgage expert with National Future Mortgage Inc. He can be contacted by email at jonofrio@whatisyourrate.com and his phone number is 856-669-6522