If you have equity in your home, you may wonder how you can access it. You don’t want to sell your home, but you know you’ve earned a profit from it.
We have many options to secure your home’s equity, one of which is the FHA cash-out refinance. Unlike the FHA streamline refinance, you don’t have to be a current FHA borrower. As long as you meet the requirements below, you can use an FHA loan to cash into your home’s equity.
Qualifying for the FHA Cash-Out Refinance
Like an FHA purchase loan, the FHA cash-out refinance has simple requirements:
How Much Can You Borrow?
The FHA cash-out refinance allows you to tap into your home’s equity, but you must leave 20% untouched.
Here’s an example:
Your home is worth $300,000 and your current mortgage is $150,000. With a new FHA cash-out refinance, you can borrow up to $240,000, but first, you must deduct the amount of your outstanding mortgage.
This leaves you with $90,000 in equity.
$300,000 x.8 = $240,000
$240,000 - $150,000 = $90,000
If you can afford the payment without going over the 43% debt-to-income ratio requirement, you could take out $90,000 from your home’s equity, leaving $60,000 untouched.
How to Use an FHA Cash-Out Refinance
The nice thing about the FHA cash-out refinance is you don’t have to justify how you’re using the funds. You earned the equity and it’s your right to withdraw it, but here are a few common uses:
How to get an FHA Cash-Out Refinance
Securing an FHA cash-out refinance is simple using these steps:
Bottom Line
If you’re thinking about tapping into your home’s equity, an FHA cash-out refinance can be a great option, especially if you have less-than-perfect credit. FHA loans have flexible guidelines and allow borrowers to get the money they need to complete their life goals.
You’ve worked hard to earn your home’s equity. If you need it for other purposes, let us help you access it. We’ll discuss your options, go over the costs, and make sure it’s the right option for you!