New FHA Cash Out Refinance Guidelines | FHA Debt Consolidation
Are you looking for the new FHA cash out refinance guidelines? Cashing out on your home allows you to pull equity out of the property where no mortgage currently exists. Whether you want to pay off debt, cash out, or do a combination of the both, an FHA cash out refinance can be a solution to your needs. Often, people cash out on their home when they are overwhelmed with high monthly debt payments, looking to do home improvements, or have other plans.
FHA Debt Consolidation
When you have equity in your home, you can use the FHA debt consolidation refinance to pay off credit cards, cars, student loans, home improvements, consolidate a second mortgage with a higher interest rate, or pay off other debts.
- Other types of debt typically have higher interest rates than mortgages and consolidating debt can save a lot of money.
- According to Experian, the average balance on a credit card is $6,506.
Cashing out or consolidating debt may be a solution for borrowers overwhelmed with high monthly payments.
Save Money By Cashing Out
Often, borrowers are amazed at how much they can save when going through with an FHA cash out refinance or FHA debt consolidation refinance. Your situation is unique and results vary, but you can go over your case scenario with a Loan Originator to eliminate high monthly payments. In some cases, borrowers can eliminate all of their other debt obligations.
New FHA Cash Out Refinance Guidelines
Mortgagee Letter 2019-11, effective for case # assigned on or after September 1st, 2019 made a change to maximum loan-to-values when cashing out with an FHA loan:
- The new maximum loan-to-value and combined loan-to-value was reduced from 85% to 80%.
- 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.
- Are only permitted to owner occupied residences.
- Debt-to-income ratios vary depending on the borrower’s 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 a specific credit score, maximum debt-to-income ratios, manual underwriting, and other internal guidelines.