There are a lot of websites urging home owners to consider selling your home, especially for those who own homes on the West Coast. Home owners on the West Coast and other increasingly profitable housing markets have the potential (at the time of this writing) to earn more than ever by selling a house.
But borrowers looking to get cash from their homes in a housing market where property values are going up have another option to consider.
It doesn’t matter if your home is in San Jose, San Francisco, Seattle, or Nashville, if your home could appraise for more money today due to the influence of a hot housing market? It could be worth an amount worth considering in the form of an FHA cash-out refinance.
If you are in a non-FHA mortgage, refinancing to an FHA cash-out refi loan could result in a decent sum of money to you (after all the expenses of the loan and the remaining original mortgage amount is settled) but it may also (depending on the lender, credit ratings and other requirements) result in a lower interest rate.
FHA mortgage loans and refinance loans have typically been offered to qualified borrowers at a more competitive rate than conventional loans that don’t have the backing of the U.S. government.
FHA cash-out refinance loans are not just for those who want to refinance non-FHA to FHA mortgages, they are also approved for FHA-to-FHA refinance loan transactions.
Your credit history, your record of on-time payments in the 12 months leading up to the new loan application and other factors will definitely affect the rates your lender offers you.
But the potential for a lower rate for the right borrower is definitely there.
Why should a home owner in a rising housing market consider refinancing with an FHA cash-out loan?
When your home was appraised for the original mortgage, that appraisal could only be used for one transaction start-to-finish. When your cash out refi loan paperwork is filled out, your lender is required to request a new appraisal. And if your home is worth much more on the housing market now than it was for the firsts appraisal?
That value is reflected in the loan amount.
So if your property was worth $200,000 before the new appraisal assigns it a different value, that different number is reflected in the amount of money you are able to borrow with the cash-out refinance loan. In some housing markets the appraisal may come in roughly “as expected”.
But for housing markets such as those on the West Coast that have significant increases in housing prices, the value of the homes may be higher than the borrower anticipates.
That’s an important consideration for an FHA home loan refinance decision.