The FHA Secure Mortgage plan recently announced by President Bush seems to be gettting the lions share of the press related to the FHA mortgage refinancing programs available to borrowers -- but it is probably not the most popular one. What is the most popular FHA mortgage refinancing option in today's world?
Probably the 95% cash out FHA mortgage refinance loan.
FHA recently added a 95% cash out option to their mortgage refinancing loan options, which allow borrowers to cash out limits of up to 95% of the home’s value and use the money for just about anything, from paying off medical bills to eliminating debts in collection, from buying a new truck to going on vacation.
While homes must fall within a certain price range to be eligible for FHA loans, there is no limit on the income of the borrower. While conventional loan programs have, for the past several years, been somewhat more popular than FHA loans, the 95% Cash Out FHA Mortgage Refinance loan has some borrowers thinking twice.
The 95% Cash Out FHA mortgage refinance loan may be the best deal going for anybody who wants to cash out a significant amount of money.
Why?
Well, home equity lines of credit, otherwise known as HELOCs, are generally one percent higher than the prime rate. And while traditional fixed rate mortgages are one percent lower than the prime rate, it’s difficult to find one that will allow a 95% cash out deal. If you do find one, you can bet it’s going to cost you a lot of money. To add to the cost, the lender will most likely require the borrower pay PMI insurance any time the loan-to-value exceeds 80%.
FHA loans cost significantly less than other loan options that result in cash for the borrower, including personal loans or loans from a credit card. That’s because unlike lenders of conventional loans, most FHA lenders and brokers don’t increase the rate—or charge additional fees—for a 95% Cash Out FHA mortgage refinance loan. FHA also offers 30-year fixed rates to 95%, which means they cost the borrower less than adjustable, prime-based HELOCs. FHA mortgage refinance programs also allow the borrower higher coupons, which means the borrower can sign off on a higher rate, and reduce or eliminate the loan’s closing costs. In addition to being low cost, borrowers using FHA 95% Cash Out loans may be eligible for certain tax deductions.
The 95% Cash Out FHA mortgage refinance loan is also a great option for any borrower who needs cash, but doesn’t have the best of credit histories. Since FHA lenders look at each loan application on a case-by-case basis, lower credit scores may be acceptable if reasonable explanations are provided. It’s also possible for people with no credit history to apply for the 95% Cash Out mortgage refinance loan.
It’s a good idea to run the numbers to determine if a 95% Cash Out FHA mortgage refinance loan is the best deal for you, when compared to other conventional loans. Call or email me anytime!
– Tammy
