Cash Out Mortgages - FHA loans vs Conventional loans - Part 1

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Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

FHA Loans & FHA Mortgages :

FHA has a "cash-out" and a "no cash-out" refinance. There are few major advantages when applying for a FHA cash-out refinance than possibly doing a conventional cash-out refinance.  All scenarios are for primary residences only. On a side note, you can do a FHA refinance, no cash-out up to 97.75% of the value of your house. And you can include your closing costs also. On a conventional refinance, you can only go up to 90% of the value of your home.

 

 

FHA Cash-Out

 

Conventional Cash-Out

Up to 95% of the value of your home  -- 95% LTV

Up to 90% of the value of your home  --  90% LTV

No hits on pricing on cash-out

¾ of a point hit up to 90% cash-out

FHA Mortgage Insurance - New risk based pricing guidelines

Monthly mortgage insurance is .52% of loan amt

Subordinate financing may take place & can exceed the CLTV of 90%. CLTV = total combination of 2 loans divided by the value of your home. A 1st & 2nd mortgage. The CLTV can be over 100% as long as the borrower qualifies with income for both loans. (case-by-case)

Subordinate financing cannot exceed 90% CLTV.

 

 

FHA 95% cash-out guidelines

  • The property secured can only be 1 -2 unit properties.
  • You must own the home for 12 + months.
  • You can not have any 30 day late in the last months. Even if it is approved through FHA score card. No exceptions. But you can do up to 85% financing with lates on your mortgage less than 12 months.

 

FHA 85% cash-out guidelines :

  • The property secured can be 1 - 4 unit properties.
  • Properties acquired by inheritances within the last 12 months are eligible for this type of refinancing. The lender must document the acquisition by showing the borrowers inheritance.
  • If the property was purchased less than a year ago, the 85% LTV is based on the purchase price and not the new appraised value.

 


Here is a chart for conventional loans, showing the penalties just for the cash-out part. You still have a penalty just for the FICO scores, which is extra and not shown.  Please consult a mortgage professional in regards to this.

cash out chart

As I have said many times, FHA loans can be much cheaper. If you did a conventional loan, cash-out with a 680 to 699 credit score, your rate would be about 5/8% higher than a FHA loan. And that is just based on a 680 or higher credit score.

 

 

Tip :  Your cash out mortgage in todays market could be very beneficial. Especially with rates still low, you can liquidate you equity and use the money in other financial vehicles to earn more money. "Don't work for your home, make your home work for you."  This is what is described as financial planning. Seek a Mortgage Professional that understands your needs and goals, who understands the market, and who can put all of this together to allow you financial freedom.

 

 

Part 2 will be about cash-out loans on jumbo loans, both FHA jumbo loans and Conventional jumbo loans.

 

 

____________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!


Copyright © 2008 by Jeff Belonger

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For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

HUD

 

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Rainmaker
280,350
Dave Woodson
Dave Woodson - Chesterton, IN
Not the Average Agent

great information as always there Jeff.   i really appreciate your information.  thanks

Jun 25, 2008 04:22 PM #1
Ambassador
1,518,466
William Johnson
RE/MAX Associates - La Jolla, CA
San Diego Real Estate Voice, GRI CRS e-Pro CDPE

Hi Jeff, I was working on setting up in excel today a similar report. Very good and I am sure consumers really love these.

Jun 25, 2008 04:26 PM #2
Rainmaker
592,140
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Jeff,

Very useful, thank you!

"primary residences only" but do they have any N/O/O programs?

Bill

Jun 25, 2008 04:52 PM #3
Rainer
69,953
Eddie Reed
Guaranty Bank and Trust Co. - Hernando, MS
MRMS, CRMS

Nice article, Jeff.  I'll be looking for part two.  Will you discuss payment comparisons and MI?

 

Jun 25, 2008 04:52 PM #4
Rainer
29,060
Tony Bolodar
Nations Reliable Lending NMLS#181407 - Plano, TX
TX Residential Mortgage Loan Originator, #1320876

Not in Texas!  The Texas A6 is a very strange animal.  Beware if your not familiar with this loan.

Jun 25, 2008 05:24 PM #5
Rainer
116,672
Bo Hussung
Bell Title /Triserv LLC - Nashvle, TN

Jeff, FHA may not be the magic bullet the industy needs but it sure is helping fill the gaps....and the rates are really good, particularly when you look at the "looser" underwriting requirements.....nice comparisons

Bo

Jun 26, 2008 03:19 AM #6
Rainer
7,841
James Ladarski
Liberty One Lending - Scottsdale, AZ

Can't beat FHA cash out guidelines....especially in the declining markets.

Jun 27, 2008 02:44 PM #7
Rainmaker
394,388
Elizabeth Cooper-Golden
Huntsville Alabama Real Estate, (@ Homes Realty Group) - Huntsville, AL
Huntsville AL MLS

Jeff-I had to re-read the line about: You CAN refi with lates, up to 85%. Are these lenders nuts?  While I do know MOST borrowers are worthy, I would certainly think with a recent late pay on their mortgage, the lenders would head for the hills. Wow, this surprises me.  I AM a big fan of FHA.

Jul 01, 2008 06:42 AM #8
Rainer
5,723
Peggy McDaniel
First Federal Mortgage - Mobile, AL

Jeff,

This was very helpful.  When you say mortgage insurance is .52% on a conventional is that monthly or yearly?

Aug 15, 2008 03:58 PM #9
Rainmaker
594,817
Lisa Hill
Florida Property Experts - Daytona Beach, FL
Daytona Beach Real Estate

I have to admit, a lot of times, your posts are over my head. I see you posted this several months ago. I wouldn't have had a clue what you were talking about at that time, or even yesterday. But the post you just wrote about the cash-outs, had the link to this one in it. Thanks to that post, now I understand this one. Cool! Thanks for all the building block posts =)

Oct 24, 2008 01:12 PM #10
Anonymous
shahan

can i get a free advice jeff?

I just bought a condo for cash, called my banker to get a cash out. I was told i have to wait 12 months before i can get even 50% back. am i stuck or is there a way around it?

Nov 24, 2008 10:11 AM #11
Anonymous
Leah Jensen

Hi Jeff,

 

I was just about to lock in our FHA refi last Monday, when my broker called me and said that it fell through.  He said that as of Feb 24, 2009, the rules have changed.  We bought our home in June 2008, but have put more than $60,000 into it.  We submitted all receipts and had the propery re-appraised.  The new appraisal was $100,000 more than the original back in June.  The new appraisal said we had to paint the outside of the house before closing.  So we borrowed more money to get this done.  Now our broker says the rules have changed.  We wanted the 95% cash out, but he said we could only do 85% cash out.  On our original loan we had two bonds.  So the 85% would only pay back those bonds, nothing else, not our debt, nor give us any cash out.    He said this new rule only applies to refis within a 12 month period.  The long of the short is, why didn't he know this prior to us paying for a new appraisal and painting the house?  I felt like he rushed us and now we are in worse financial shape than we were before we called him!  Is this just how it goes, or was he negligent in not doing his research prior to telling us to pay for the new appraisal and painting the house?

 

Thanks, I enjoy your blog, I find it really helpful.

Leah

Mar 10, 2009 11:20 AM #12
Ambassador
745,711
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

SHAHAN... I am so sorry that I missed your question. If you still need help with this, please e-mail me at jbelonger@ihmci.com   Waiting 12 months doesn't say that you can only get 50% back. It's 12 months seasoning period.  There could be another way, hence why I would like you to e-mail me.

 

LEAH.... I am glad this was helpful, but you aren't the only one that gets misinformation prior and during the mortgage application. I just spoke to 2 people this weekend, 1 of them going through 3 lenders... each one promising them that they could do it and all 3 not coming through at the end. Yes, many assume or don't know what they are doing until it's too late.  In regards to your loan, I would need some more information, but it sounds like the lender you were using doesn't have other outlets. I can still do up to 95% refinances. Some investors stopped this, but not all.  Please call me at 609-440-5133 or e-mail me at jbelonger@ihmci.com    thanks, jeff

 

Mar 10, 2009 11:32 AM #13
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