December 4, 2021

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FHA Cash Out Refinancing Advice

FHA Cash Out Refinancing Advice

What do home owners need to know about FHA cash-out refinancing? There are a number of questions to ask yourself before you commit.

Refinancing can be a big financial help for a home owner but getting the right loan for your needs is half the battle.

Ask Yourself If You Need Cash-Out Refinancing And Why

A cash out refinance loan can help you thanks to the cash back on the transaction, but is cash back really what you need? If your real goal is to improve the home, for example, you can apply for a different type of refinancing that could provide more money for those improvements than a cash-out refi loan could.

An FHA 203(k) rehab loan is perfect for those who need to do home improvement projects and if your upgrades are on the list of approved projects, the 203(k) loan might be the better option.

FHA Cash-Out Refinance Loans And Your Credit

If you ‘re certain the cash-out loan is what you need, you will have to prepare your credit for this FHA refi loan the same as you would for a new purchase home loan.

That means cutting your debt ratio, working on paying down credit cards, and making 100% on-time payments for the year leading up to your loan application.

It’s best to give yourself plenty of time to work on your credit before applying for a cash-out refinance, as the same issues that apply to new purchase loan applications apply to cash-out refinance loans too. If you find evidence of identity theft, inaccurate data on your credit report, or other problems, they will take time to sort out.

Preparing For A Refi Loan

The same advice applies to refi loans as it does for new purchase FHA mortgages; don’t take out a car loan, new credit cards, or apply for other credit when you are in the process of getting a refinance loan. Your lender will scrutinize your finances the same way as is done with a new purchase home loan.

When buying or refinancing real estate, it is best to approach this loan process as the only credit you are applying for at this time.

FHA Refinance Loans: Other Options

Maybe you’re feeling a cash-out refinance is not for you? If you need a lower interest rate or lower payments, an FHA-to-FHA Streamline Refinance is perfect for those with existing FHA mortgages.

Those who do not have FHA loans are still able to refinance with a no-cash out refinance loan (rate-and-term, or simple refinance) or a cash-out refi.

Joe Wallace - Staff Writer

By Joe Wallace

June 10, 2019

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for for (8) years and is currently the Associate Editor for

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