The talk I have heard is that this may take effect 12/1/08. If anyone is considering a Cash out refinance using FHA they may want to start the process soon.
There has been talk that FHA is going to reduce their cash-out LTV. At this moment, there are 2 different types of maximum cash-out's. 95% & 85%..... There are different quidelines for each cash-out mentioned above. FHA Loans cash-out LTV's. (the two current types)
From speaking to a few people, it looks like FHA will go back to the 85% LTV for cash-outs. The main reason behind this is because the 95% cash outs aren't performing as well as they would like. It's a shame, because I think this is a great FHA loan program. I have closed 3 FHA cash out loans in the last year and all 3 of them are doing well.
Here is my take on why they should still be a viable mortgage. As it stands, you can do a rate & term refinance on a FHA loan up to 97.75% of the value of your home. (LTV) And if you are qualifying this borrower with the normal qualifications such as income and credit, the borrower should be good to good except for unseen circumstances. Circumstances such as loss of job, loss of income, death in the family, divorcee, etc etc.
Now, you are doing a FHA cash out up to 95%. You are including some of your credit cards into the new loan to reduce your total monthly payment. You still qualify by normal guides and such. And you might save $300 or more a month on your total output. Sounds great, right? You are ahead of the game, right?
But.... yes, there is always a but... I am sure there are studies out there that many of these same borrowers go back out there and open up some new credit cards. Wham, they could be right back to where they were or possibly with a higher debt load. But overall, I would think that the consumer should still be better off. Wouldn't they just go out there now and get new credit cards if they couldn't refinance?
FHA cash out -- If anyone is still interested in doing a 95% cash out, as long as it follows these basic guidelines, you would need the new mortgage to be assigned a FHA case number for any lender or investor to do this loan. The problem is that there hasn't been a date set for this to take place. Again, if you are thinking about this, you need to act quickly. I will update this blog with any new information that I obtain... thanks
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