When you’re faced with a major expense, this type of refinance from CrossCountry Mortgage can help.
Life happens. Whether you need to pay for college or pop for a new car, major expenses arise unexpectedly and can sneak up on you no matter how hard you try to prepare. If you already have a mortgage and you’ve been thinking about refinancing, it might be worthwhile to consider an FHA Cash-Out Refinance from CrossCountry Mortgage.
If you’ve never had an FHA mortgage before, you may be wondering what the FHA is and what benefits come with an FHA mortgage. The Federal Housing Administration (FHA) is a government agency that provides insurance on loans given through FHA-approved lenders like CrossCountry Mortgage.
As for the benefits, the answers to these 7 questions will help you decide if an FHA Cash-Out Refinance is right for you.
1. Are you in need of additional funds?
If so, there are several significant benefits to an FHA Cash-Out Refinance, including the ability to borrow more than you currently owe on your home. This gives you the chance to apply the additional funds to a major project, life event or purchase, such as:
- College tuition.
- Home improvement projects.
- A car loan or buying a new car.
- Unexpected medical expenses.
- A wedding or honeymoon.
- Debt consolidation at a lower interest rate
There are no major restrictions on how homeowners can use these additional funds. In many cases, an FHA Cash-Out Refinance could be a less expensive way to borrow money than other traditional routes. Your CrossCountry Mortgage loan officer can help you figure in closing costs and determine how much you will have to borrow to get access to the funds you need.
2. Are you considering adjusting your mortgage anyway?
In addition to the benefit of extra funds to assist with expenses, refinancing may also help adjust your current mortgage terms to your advantage, especially if you are refinancing from a conventional mortgage. You may be able to:
- Lower your interest rate.
- Change the loan term.
- Transition from an adjustable rate to a fixed rate.
3. Have you had any late or missed mortgage payments recently?
To be eligible for an FHA Cash-Out Refinance, you must have made your last 12 monthly mortgage payments on time. If you have owned your home for fewer than 12 months, you must have made all of your payments on time.
4. Have you owned your home for at least a year?
While you can enjoy the benefits of this type of refinance after only owning your home for 6 months, it is far more advantageous for you to apply for this type of loan after at least 12 months have gone by.
At less than a year, you may be more limited in your access to funds. That’s because your maximum loan amount will be 85% of either the current appraised value or the original purchase price of your home, whichever is less. If you wait at least a full year, the maximum amount will be calculated on the current appraised value.
5. Can you afford higher long-term monthly payments?
Increasing the amount of your loan will most likely increase your monthly payments. Although there are many benefits to an FHA Cash-Out Refinance, the required upfront and monthly mortgage insurance premiums are a significant disadvantage.
The upfront insurance cost (1.75% of the loan amount) is wrapped into the loan, while the monthly premiums (ranges depend on loan length and down payment amount) are split into 12 installments paid with your mortgage each month. These additional insurance premiums also raise your monthly mortgage payments.
In exchange for the mortgage insurance premiums, the FHA Cash-Out Refinance is more flexible in terms of credit requirements and loan-to-value limitations.
6. Do you live in the home?
FHA Cash-Out Refinances are only available on owner-occupied homes. Unfortunately, you cannot use this type of refinance on a second home or rental home, and non-occupant co-borrowers are not allowed.
7. How is your credit?
Generally, for an FHA Cash-Out Refinance, lenders will require a minimum credit score between 640 and 680.
Take The Next Step!
As you can see, there are a lot of things to think about when considering a refinance. If you are still interested in an FHA refinance but are not sure the cash-out refinance option is for you, the FHA also offers a more standard streamline refinance.
If you have any questions about an FHA Cash-Out Refinance or other refinancing options, start the conversation with your licensed CrossCountry Mortgage loan officer today!