FHA Changes Cash-out Refi Guidelines

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Mortgage and Lending

This update from FHA Letter 2009-08 establishes temporary cash-out refi guidelines.

Here are the 9 things you need to know about these changes:

1. This is a temporary change, and effective as of April 1st, 2009 (No, it's not a joke).

2. When adding a simultaneous 2nd lien, there will be a max CLTV of 85%.

3. Existing 2nd liens can be re-subordinated with no max CLTV.

4. When existing 2nd liens are modified to accommodate the new 1st, there is no max CLTV.

5. Must have 12 months seasoning as primary residence to get max cash-out of 85%.

6. Less than 12 months seasoning as primary residence, loan amount will be capped at 85% of the appraised value or sales price, whichever is lower.

7. Existing loan must be current and not delinquent or in arrears.

8. A second appraisal is required for all cash-out refis above $417,000.

9. Non-owner occupants cannot be added to qualify for cash-out refis.

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