An FHA cash out mortgage is basically a new mortgage on the house that pays off the current mortgage, and also gives the homeowner additional cash from the remaining property equity in the house to be utilized for other purposes. These are usually only the basics to qualify for an FHA loan. Usually an FHA loan requires a decent credit history, down payment (sometimes as low as 5%) and a decent income. It is easy to qualify if you know where to look.
The first thing to look at is your closing costs. The closer the closing costs to get to your mortgage insurance premium then you may not qualify for the FHA. Closing costs are calculated based on how much the house was sold for, the amount of interest paid, the size of the loan itself and the number of months left on the loan. Also, if you have any expensive repairs to make before or after closing then this will increase the mortgage insurance premium even further.
To save on your monthly mortgage payment a good way to lower them is to get some cash up-front. This can be accomplished by selling your old home equity to cash out lender. Once the old FHA loan has been paid off you will have some cash on hand. Talk to your lender about refinancing into an FHA loan. You will get a better deal this way as the closing costs will be reduced. Most cash lenders will help you repay your home equity loan with a lower interest rate and a fixed term.
The second thing you should do is to shop around for a decent interest rate. When you find one, you may get a better deal if you agree to pay closing costs for another year. In most cases you can lower your mortgage payments with a combination of an FHA loan and cash out mortgage refinance. You will end up with a lower payment, the less interest and a longer loan to repay.
After you have determined what you need in cash, you must now shop for a decent interest rate. You need to shop with several cash lenders for the best deal. Keep in mind that the higher the interest rate the higher your monthly payment will be. Also, the lower the interest rate, the more money you will pay in principal each month.
To qualify for an FHA cashout refinance you will have to meet several criteria. One thing you need to know is if there are any unpaid loans on your current mortgage. If there are, your new lender will want a statement showing all of your loans to prove that you currently have at least six months of payments past. In order to find out if you qualify for cash refinance you will need to get a hold of your mortgage records from your existing lender.
In order to determine your current credit score, you will need to pull your credit report from one of the three major credit reporting agencies. Then you will need to check the appropriate sections of that report. The section where it discusses your mortgage history should show the exact dates that you financed your property. If you financed it within the last three years then your credit score will probably be fairly low. That is the reason that you need to have a minimum credit score in order to qualify for a cash out FHA loan.
The third thing you need to know is that these cash loans are offered by private not government lenders. These private lenders will generally charge higher rates of interest than government lenders but they do not require as much documentation from borrowers. However, the only thing you absolutely must have is a complete and accurate appraisal of your property. There is an exemption for pre-existing conditions but borrowers must contact the lender before applying. Borrowers can also obtain a pre-approval from the FHA before submitting their complete application so they don’t even need to visit a lender.