Dallas Home Appraisals News and Information

The times they are a changin'.  For FHA loans, case numbers assigned after today (March 31) will not be eligible for 95% cash-out refi's.  Effective for case number assignments on or after April 1, 2009 the loan-to-value (LTV) of any cash-out refinance to be insured by FHA may not exceed 85 percent of the appraiser’s estimate of value.

To understand what this might mean to you, suppose that you have a property appraised at $300,000. Then suppose that you have a loan with a $200,000 balance and you decide to refinance.

Under the current FHA rules you could get a new loan equal to 95 percent of the appraised LTV, in this case $285,000. Pay off the old loan and you walked away with $85,000 in cash (less closing costs).

Beginning with case numbers assigned on or after April 1, 2009, you can only get 85 percent of the property’s appraised LTV in a refinance. So instead of 95%, multiply your $300,000 appraised value by 85%, and instead of walking away with $85,000 cash out minus closing costs, your max cash out will be $55,000 less closing costs.

Following are some of the other new FHA rules:

• The borrower must have owned the property for at least 12 months to qualify for the 85 percent LTV cash out.
• For property owned less than 12 months, the mortgage amount is limited to the lesser of either 85 percent of the appraiser’s estimate of value or 85 percent of the sales price of the property when acquired. (Sales price need not be considered however if the property was acquired as the result of inheritance and is or will become the heir’s principal residence.
• Borrowers who are delinquent or in arrears are not eligible for a cash-out refinance.
• A second appraisal is required on cash-out refinances that exceed $417,000 if the property is in a “declining” area.
• A co-borrower or co-signer being added to the note must be an occupant of the property. Non-occupant co-borrowers or co-signers may not be added in order to meet FHA’s credit underwriting guidelines for the cash-out refinance.
• Properties owned free and clear may be financed as cash-out transactions.
• Between October 1st, the start of the government’s fiscal year, and February 28th, HUD refinanced 285,569 loans.

For more information on FHA loans, contact Blue Star Appraisals Inc. and let us put you in touch with a broker or lender who handles FHA mortgages.