FHA Cash-Out Refinance Loan Tips
Do FHA Cash-Out Refinance Loans Require a New Appraisal?
FHA cash-out refinance loans do require an appraisal, and borrowers who live in housing markets that are on the rise should check to see how far property values have increased since the last appraisal.
Naturally the current state of the property will play an important part in the valuation of your house, but similar homes in the area will also factor in; these “comparables” will help the appraiser determine how much your home is worth now where applicable.
Do I Need a Full Credit Review for an FHA Cash-Out Refi Loan?
Yes. It is best to approach a cash-out refinance loan the same way you approached the original mortgage; prepare your credit, make sure you have 12 months of on-time payments on your credit history leading up to your loan app, etc.
Should I Pay Off Student Loans or Other Big Debt With My FHA Cash-Out Refinance Loan?
The answer to this question depends partly on your financial goals and partly on basic math. If the interest rate on your old loans is higher than the interest rate on the new FHA cash-out loan, it may make sense to think about paying off those old debts.
But you should always calculate the cost of the loan and the cost of your decision over the lifetime of the new loan; never go into these decisions without running the numbers. You may find that in some cases it’s more cost-effective to apply the proceeds of your cash-out refi loan elsewhere.
But in other cases, it may be quite sensible to consolidate your debts with the proceeds of a cash-out refi. It all depends on what your goals are in the short and mid-term.
Are There Restrictions on the Use of My FHA Cash-Out Loan?
FHA loan rules do not restrict how the cash-out funds may be used once the expenses for the new loan are paid and the old loan is paid in full. Lender standards, state law, and other regulations may have a say, however. It’s best to check with the loan officer to see what may apply in your circumstances.
Remember that any add-ons to your refinance loan may increase the overall cost of the new loan. Consider your options carefully when applying for cash out and ask the lender how any add-on may affect the amount of money you get at the end of the refi loan process.
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