Cash Out Refinance

If you have equity in your home, and are looking to take cash out, you should learn about what options may be available to you.

People take cash out of their home for many reasons. It is very commonly used for debt consolidation, including paying off personal debts, credit cards, auto loans, and student loans.  Others may cash out refinance to invest, purchase another property, finance home improvements, pay for college, or to use for emergency funds.  Whatever your reasons are for cash out refinancing, we hope that you find the best program to help you achieve your goals.

Types of Cash Out Refinance Programs:  

• Conventional cash out refinance loans
• FHA cash out refinance loans
• VA cash out refinance loans

How do you know which is best program for you?  The following overview of each loan type will help you determine which is the right loan for you.  If you like to find out what cash out refinance programs you qualify for, we can help match you with a mortgage lender.

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Conventional Cash-Out Refinance Loan: 

The conventional cash out refinance loan is best suited for borrowers that only need to cash out up to 80% of their equity.  The 80% maximum loan-to-value rule is set by Fannie Mae guidelines.  Therefore, no mortgage lenders offer conventional cash out loans that provide a higher LTV.  One of the major advantages of conventional loans is that no PMI (private mortgage insurance) is required on loans with a 80% or lower LTV.

Advantages:

• Avoid PMI –  The LTV restrictions are helpful in the sense that a loan is capped at 80% LTV, which means you do not have to pay any PMI (private mortgage insurance).  This can save you thousands of dollars.
• Lowest Rates – Conventional cash out refinance loans generally offer lower rates than FHA loan than FHA.  The combination of lower rates and avoiding paying mortgage insurance can save a borrower a lot of money, especially overtime.

Requirements:

Conventional loans are not as easy to qualify for as FHA loans.

• Credit Score – Conventional loans require an absolute minimum of a 620 credit score.  In some cases, a higher credit score may be required. These guidelines lead many people to take cash out with a FHA loan instead.
• Seasoning Requirements –  The seasoning requirements for a conventional cash out refinance are that you must wait 6 months after you purchased your home to refinance and take cash out.

Would you like to see if you qualify for a conventional cash out refinance loan?  We can help match you with a mortgage lender that offers cash out refinance loans in your location.

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FHA Cash-Out Refinancing Loan:

FHA loans are ideal for borrowers who might not qualify for a conventional loan to tap into their equity.

Advantages:

• Lenient on Credit – The credit qualification requirements through the FHA are more lenient and less documentation is required.
• 80% LTV – FHA loans previously allowed you to cash out up to an 85% LTV.   However, the FHA cash out refinance program now only allows you to cash out up to an 80% LTV.

Requirements:

• Credit Score – Technically, all FHA loans only require a 500 credit score.  However, you are more likely to get approved for an FHA loan with a 580 credit score or higher.
• Seasoning Requirements – The FHA rules stipulate that the home must have been purchased at least one year prior to taking cash out.  This is one area that a conventional loan beats out an FHA loan for cash out refinancing.  If you purchase your home less than a year ago, you may want to consider a conventional cash out refinance which only requires a 6 month waiting period.
• Fixed Rates Only – There are only fixed rate mortgages, no adjustable rates are offered for FHA cash out refinances.  Most prefer fixed mortgages rates over adjustable rate mortgages (ARM loans), so this should not be an issue for most borrowers.  Most FHA cash out refinances are amortized for 30 years (although other amortization schedules are allowed depending on what your needs are).  You have the option to choose a 15 year fixed as well.

Would you like to see if you qualify for an FHA cash out refinance loan?  We can help match you with a mortgage lender that offers FHA loans in your location.

Click here to get matched with an FHA lender

VA Cash-Out Refinance Loan:

One of the greatest perks provided to veterans is the fact that they are eligible to apply for special home loans, which includes the best cash out refinance program available.  The advantages of VA cash out loans are tremendous.

Advantages:

• 100% Cash Out LTV – Veterans can take 100% of their equity out of their home using a VA cash out refinance.  This is a serious advantage over conventional loans (80% max LTV), and FHA loans(85% max LTV).  Not all applicants will qualify for 100%, some are limited to 90%.
• Low Rates – There are special low rates for VA home loans.
• No PMI – VA loans do not require any mortgage insurance.  This will save a veteran thousands of dollars over the life of the loan.

Requirements:

• Veteran or Active Duty – These special home loans are exclusively offered to veterans and active duty members of the military (also eligible spouses qualify).
• 100% Cash Out LTV – Veterans can take 100% of their equity out of their home using a VA cash out refinance.
• Low Rates – The rates on VA loans are lower than most others.
• No PMI – VA loans do not require any mortgage insurance to be paid.

To learn more about the VA cash out program, click here.

Would you like to see if you qualify for a VA cash out refinance loan?  We can help match you with a mortgage lender that offers VA loans in your location.

Click here to get matched with a mortgage lender

Questions About Cash Out Refinancing

Below are some of the most frequently asked questions about cash out refinancing.  You may also view some more questions and answers about cash out loans, on this cash out refinance FAQ.

Are cash out refinance loans available for investment properties?
Cash out refinancing is available for investment properties, but exclusively on conventional loans. FHA and VA loans are not available for investment properties.

What are the loan limits for cash out refinances?
The loan limits on cash out mortgages are the same as other similar loan types. Conventional and VA cash out loans use the same conforming loan limits as a purchase or rate and term refinance. FHA loan limits are the same on all types of FHA loans.

What options exist for multifamily properties?
Any eligible multifamily property with 2-4 units that is owner occupied (meaning you occupy at least one of the units as your primary residence) can apply for a cash out refinance. As long as your property meets the conventional, FHA, or VA guidelines for a multifamily property, you can cash out refinance. The same LTV restrictions apply, however, the loan limits are higher (please reference the conforming or FHA loan limits for your county).