FHA Cash Out Maximum LTV Change!

Mortgage and Lending with First Home Bank NMLS #630694

HUD announced that effective for any FHA case number assignment on or after April 1, 2009 the max ltv for cash out refinances may not exceed 85%.

The good news is that HUD is implementing it on a temporary basis while it analyzes the performance of these loans and the industry to determine whether it should be a permanent measure.

The Mortgagee Letter also states that any non-occupant co-borrower being added to the note must occupy the property and that they can't be added in order to meet credit underwriting guidelines for cash out.

Keep in mind that is not required for non-occupant co-borrowers in purchase or rate/term refinance transactions. In fact, FHA allows max financing for borrowers related by blood, marriage or law (spouses, parent-child, siblings, aunts, uncles, nieces, nephews) and does not impose any additional underwriting criteria on such transactions, including specific qualifying ratios that the occupying borrower must meet individually.

For instance, we've had borrowers who were juniors in college (must document 2 years education after high school) purchase a home using mom and dad as non-occ co-borrowers with max ltv of 96.5% (if parent is selling to a child, the parent cannot be the co-borrower on new mortgage unless ltv is 75% or less).

It is not too late to apply and close your loan prior to the effective date if you are prompt contacting me. First Choice Bank Mortgage Division has in house underwriting and closing. While many Banks are currently backed up in their underwriting departments for weeks, my underwriting department is averaging 3 days.


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Gerald ( Jerry ) Santoro

Mortgage Planning Specialist
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