FHA Maximum Loan to Value Cash Out Refinance 

Cash out refinance graphicThe FHA cash-out refinancing option enables homeowners to pay off their current mortgage and borrow up to 80% of the appraised value of their home. In other words, after paying off the current mortgage and closing expenses, the homeowner must have 20% equity. Here's an illustration:

Current Home Value 250,000
X 80% of home value ($250,00 X 80%) = 200,000

Less payoff the current loan

150,000

Less closing costs and prepaid costs (estimated)

4,000
Maximum FHA cash back at settlement 46,000

Borrower eligibility for a cash out mortgage

Occupancy Requirements - Only owner-occupied Principal Residences are eligible for cash-out refinances. The Borrower must have owned and occupied the property securing the cash-out refinancing as their Principal Residence for the previous 12 months prior to the date of case number assignment. There is an exception for infeirited properties.

Payment History Requirements - The borrower has paid all of their mortgage payments within the month due for the preceding 12 months or since the borrower acquired the mortgages, whichever comes first. In addition, all mortgage payments secured by the subject property must be made within the month due for the month previous to the mortgage closing.

Mortgage payments must be made for at least six months on properties with mortgages.

Cash-out transactions may be used to refinance properties that are free and clear.

Maximum Mortgage Amounts - As stated earlier, the maximum loan amount is 80% of the appraised value; further, the loan must be less than the FHA maximum loan amount for the county where the home is located.

If there is a second or third mortgage on the property, the total of all loans (including the first mortgage) may not exceed 80% of the combined loans.