Take Equity Out Of Your Home In Cash With An FHA Refi Loan
November 25, 2024
The FHA loan program has some competition in this area, but how do your other government-backed refinance loan options measure up?
There are different types of cash-out refi loans, and among the most popular options are the FHA cash-out option and the VA loan option. Let's break down how they work and who they're best for.
FHA Cash-Out Refinance
FHA loans are insured by the Federal Housing Administration, which makes lenders more likely to offer them better terms to borrowers with less-than-perfect credit or who are new to the job market.
How FHA cash-out refinancing works:
You apply for a new mortgage loan: This new loan pays off your old mortgage and gives you the extra cash.
The cash can be used for almost anything: home improvements, debt repayment, college tuition—any purpose acceptable to the lender.
You make payments on the new loan: Like your old mortgage, you'll have monthly payments and mortgage insurance to cover.
Who's a good fit for an FHA cash-out refi?
Homeowners with some equity: You must have built up some equity in your home to borrow against it.
Decent credit score: While FHA loans are more forgiving than some other types, your borrower takes more risk with transactions that involve cash back to the borrower.
Steady income: Lenders want to see that you can afford the new loan payments.
VA Cash-Out Refinance
The Department of Veterans Affairs guarantees VA loans for veterans, qualifying military, and eligible surviving spouses. Not all house hunters qualify for this option.
Here's how VA cash-out refinancing works:
Similar to FHA, you get a new, larger mortgage: This pays off your current loan and gives you cash back.
You can use the cash for almost anything: Just like with FHA, you have flexibility in using the funds.
You repay the new loan: You'll have a new loan term and monthly payments.
Who's a good fit for a VA cash-out refi?
Eligible military personnel and their families: This is a key requirement.
Sufficient home equity: You'll need equity to borrow against, so it's wise to own your home for several years before applying.
Meeting VA requirements: There are specific requirements for service history and creditworthiness.
FHA loans have limits that differ by county, but VA loans generally don't have limits for those with full entitlement.
Regarding credit score requirements, FHA loans tend to be more lenient, while VA loan requirements can vary based on the lender and other factors. A significant advantage of VA loans is that they don't require mortgage insurance, which FHA loans do. However, VA loans may have a funding fee, although some borrowers are exempt from this.
FHA Loan Articles
November 2, 2024When it’s time to consider buying a home, the Federal Housing Administration (FHA) offers two popular options. One is the traditional FHA purchase loan many use to buy a house in the suburbs. But not everyone wants to buy an existing property. Some want more control over the design and configuration of the home.
The other FHA construction loan option, the one-time close mortgage, comes in here. This option is for those who want to approve floor plans, have a say in the types of materials used to build the home and choose its features.
October 31, 2024When buying a home for the first time, it helps to know how long the process can take. How do you know if your appraisal report is delayed if you don’t know how long the FHA allows for the process to be completed? How long does it take to get from the final offer to closing day? A “typical” FHA loan process may take up to 45 days from start to finish. Several factors can influence this timeline.
October 30, 2024Just because an FHA loan is designed to be more lenient with FICO scores and require a lower down payment doesn’t mean the house you buy with that loan is less than ideal. Did you know that FHA loans have minimum property standards to ensure the home is safe and livable? Those standards require the home to have an “economic life” for the entire term of the loan so you can freely sell the property later on if you choose to do so.
October 29, 2024Buying a home with an FHA mortgage is a major life decision, and preparation is essential before you start house hunting or consider making an offer on a property.
How to get started? In the early stages, establishing your budget and how much work you need to do on your credit is key. But once you have gotten past the initial phase of that planning you’ll want to consider the house itself and what you want from it.
October 25, 2024Mixed-use properties combine residential and commercial spaces. Some borrowers applying for FHA home loans want to know if purchasing such a property using an FHA single-family home loan is possible. The FHA does allow the use of its loans for mixed-use properties, but certain conditions must be met.
