Frequently Asked Questions About Cash-Out Refinance Loans

November 20, 2018

There are several frequently asked questions about FHA cash-out refinance loans. Do you know what to expect when you want to pull value out of your home in cash? Is there a difference between cash-out refinance loans in Texas and New York? How much money will you get in cash? These and other questions are important to answer in advance.

Are FHA Cash-Out Refinance Loans the Same in all Housing Markets?

The short answer is no, and the reason for this is that all housing markets differ. If you are applying for an FHA cash out refi loan in an area with rapidly increasing property values, you may discover your home is worth far more than in a housing market that has experienced a plateau in those rising values, or one that has not gotten as “hot” as other markets.

Why Is My Home Worth More or Less In My Housing Market Than it Would be Elsewhere?

Basically, property values don’t increase or decrease in a consistent way nationwide. There are a number of variables that can affect how much money you are able to get on an FHA cash-out refinance loan including how your home measures up to other comparables in the area.

A “comparable” is a home that is similar to yours and used to determine what is typical in that housing market for your type of property.

If other properties have increased in value near you that are similar to your kind of home, it’s possible that the “rising tide lifts all boats” may be applicable to the valuation of your home.

How Is the Current Value of My Home Determined?

Cash-out refinance loans require an appraisal; this process is used to determine what your home is worth on the market at appraisal time.

Cash-out refinance loans require both a new credit check and appraisal; only after the appraisal can the lender make a determination as to how much loan you are eligible to apply for.

How Much Cash Back Will I Get From My FHA Cash-Out Refinance Loan?

The amount of cash back to the borrower depends on how much is owed on the existing loan and how much is left over after the original mortgage is paid off. The borrower who has made mortgage payments for a short amount of time may not get as much cash back as the borrower who has been making mortgage payments for some time.

If you have made at least six mortgage payments on your existing loan, you may be technically eligible for an FHA cash-out refinance loan. But applying so soon after your original mortgage may (or may not, depending on property values and other factors) be too soon if you need a larger amount of cash back on the transaction.

It’s best to discuss your needs with a participating FHA lender to see what type of loan may be best for you based on the age of your current loan, the conditions in your local housing market, etc.

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