February 4, 2019
There are several important issues centered around FHA cash-out refinance loans. Borrowers who want to cash in on the value of the home will wonder about many aspects of cash-out refi loans. How much money will you get in cash? How long before you can successfully apply for an FHA refi loan once you have purchased your first home?
FHA Cash-Out Refinance Loans: Not The Same At Every Lender
All housing markets differ and lender standards/requirements will also vary. When it comes to the differences in housing markets, those applying for an FHA cash-out refinance loan in an area with rapidly increasing property values may discover your home is worth far more than originally thought. The reverse may be true in areas that are leveling off or are experiencing changes in the available “inventory” of homes.
Why The Home To Be Refinanced May Be Worth More Or Less In A Given Housing Market
Property values don’t increase or decrease uniformly across the U.S.A. There are plenty of variables that can affect how much money you are able to get on an FHA cash-out refinance loan including how your home appraises, the amount of mortgage payments you have made already, etc.
Where the appraisal is concerned, there are issues related to “comparables” which are houses similar to yours, comapred side-by-side determine what is typical in that housing market for your type of property.
If other properties have increased in value near you that are similar to your kind of home, it’s possible that your home may be affected too, depending on circumstances.
How Is The Current Value Of The Home Affects Cash-Out Refinance Loans
Since FHA cash-out refinance loans require an appraisal it won’t be known how much cash you can get back on the transaction until the appraisal results are in; the current value of your home may be slightly or dramatically different than the first appraisal depending on how property values have fared in the meantime. But the value of your home is only part of the equation. Your mortgage payments and how many you have made since you started making them will be an important factor, too. The longer you wait to apply for a cash-out refinance loan, the more borrowing power you may find depending on how many payments have already been made.
How Much Cash Back Will I Get From My FHA Cash-Out Refinance Loan?
The amount of cash you get for your refinance loan transaction depends on how much is owed on the existing loan and how much is left over after the original mortgage is paid off. You will also need to factor in the amount of closing costs.
People who have purchased their first home may be tempted to apply for a cash-out refinance loan soon after closing the deal on the property they choose as a first-time buyer
If you have made at least six mortgage payments on your existing loan, you may be technically eligible for an FHA cash-out refinance loan. But applying so quickly may not be in your best financial interests. It may be a very good idea to do some research about property values in your area, how long people typically wait in that housing market before refinancing and why, etc.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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