FHA Cash Out Refinance and Debt Consolidation | FHA Cash Out Guidelines
A FHA cash out refinance allows homeowners who have equity in their home to pull equity out of the property where no mortgage currently exists. A borrower can do a combination of an FHA cash out refinance and FHA debt consolidation by paying off debt and/or getting cash back. In some cases, borrowers have to pay off existing debts to make them eligible for a FHA cash out refinance due to debt-to-income limits. Going through with a cash out FHA loan may be a solution for borrowers who are overwhelmed with high monthly payments, looking to take cash out for home improvements, or have other plans.
FHA Debt Consolidation
A borrower that has equity in their home can do a FHA debt consolidation refinance to pay off credit cars, cars, student loans, home improvements, roll in a 2nd mortgage… etc.
- According to the Federal Reserve, the average APR on credit card account assessed interest rate is 15.5% and revolving credit balances are $1.04 trillion.
- The American Bankers Association claims that 44% of credit card account are not paid in full every month.
Cashing out/consolidating debt may be a solution for borrowers overwhelmed with high monthly payments.
What can a FHA Debt Consolidation Loan Do For You?
- Often, borrowers are amazed at how much they can save when going through with a FHA cash out refinance or FHA debt consolidation refinance.
- Every borrower’s situation is unique and results will vary because there are many variable factors.
- Run your case scenario by a Mortgage Loan Originator to see how much you can save with a FHA cash out refinance.
FHA Cash Out Refinance Guidelines – Cash Out FHA Loan
- Can cash out up to 85% of the appraised value.
- New loan amount would be 85% of appraised value plus FHA up front mortgage insurance premium (MIP).
- No mortgage trade line, including mortgage line of credit payments, with any current delinquency or any delinquency within the last 12 months of the case number assignment date.
- FHA cash outs are only permitted to owner occupied residences.
- Debt-to-income ratios vary depending on the borrowers case scenario and Automated Underwriting System (AUS) findings.
- See waiting periods for bankruptcy and foreclosure for current waiting periods.
Some mortgage companies have stricter FHA cash out refinance guidelines called an overlay, which is an internal guideline on top of FHA guidelines. Some examples include, but not limited to: specific credit score, maximum debt-to-income ratios.. etc