A friend of mine is trying to refinance. However, he ran into some issues that will not allow him to get approved for this loan conventionally. Can FHA be a viable option for someone who is looking for a cash out refinance? I told him that there would still be that upfront PMI..what would be the benefit?
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3 Responses to 'FHA - Can a person who has not previously used FHA to purchase their home benefit from a refinance through FHA'
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One benefit is that FHA is not credit score driven.
Benefits-
FHA.may qualify him.
FHA rates are good right now.
FHA allows cash out with few restrictions.
The Tax Write offs on the closing costs, MIP and future interest payments.
Lowering his rate will lower his monthly payment on his existing principle balance. The extra cash out will be at a good fixed interest rate and the interest costs should be tax deductible. The cost of the upfront MIP should also be tax deductile under the current tax codes.
If I needed the money, low cost, fixed interest rate money is always a great option.
The Negatives:
More and more lenders are adding risk based fees on borrowers with low credit scores. (580 or less)
Edit: Lisa L is correct- FHA guidlines will allow cash out up to 95% on some property types; on others, mobile homes for example the most you can borrow in a cash out refi is 70% ltv depending on it’s year of manufacture and condition.
You can also go to 95% LTV on a FHA cash out without rate additions. Excellent cash out option right now. I am doing a lot of them.