Dennis Norman Musings

By: Dennis Norman

Dennis Norman

Effective April 1, 2009, FHA will lower the amount you can borrow when refinancing your home loan if it is a “cash-out” refi.  The term “cash-out” simply means you are borrowing more than your existing debt…thereby resulting in you getting “cash-out” of your home’s equity.

In the past FHA has allowed you to borrow up to 95% of the value on a cash-out refi but, effective April 1st, they will limit the loan to 85% of the value of your home.

Other requirements that FHA imposes on this type of refinancing include:

• 12 months of ownership- The subject property must have been owned by the borrower as his or her principal residence for at least 12 months preceeding the date of th loan application.
• Borrowers that are delinquent or in arrears under their current mortgage are not eligible.
• Second appraisal- A second appraisal is rquired on cash-out refinances that will exceed $417,000 and the property is in a declining area.
• Existing mortgage not required – Properties owned free and clear may be finance as cash-out transactions.