FHA Cash-Out Refinancing can be a great financing tool for some homeowners. Cash-out refinancing is a loan where you borrow more than you owe on your mortgage. Then after the mortgage and loan costs are paid, you receive the extra cash.
FHA Cash-Out Refinancing is permitted on:
- owner occupied principal residences
- properties owned free and clear
If the property has been owned as a principal residence for less than 12 months preceding the loan application, the loan amount is based on the lesser of 85% of the sales price or the current appraised value of the property. The sales price need not be considered if it was inherited.
Borrowers are not eligible:
- who are delinquent or have mortgage delinquencies within the most recent 12 month period
- with less than 6 months payment history on the existing mortgage
The mortgage must be current and all payments must have been made within the month due for the previous 12 months; or for more than 6 months and less than 12 months of payment history, all payments were made when due.
For more information, see Handbook 4155.1: 2.B.6.a; 3.A.1.k; 3.B.2.