If you're considering refinancing and you're interested in taking cash-out to pay off debts, make home improvements or to eliminate a second mortgage that you did not obtain when you purchased your home; you have more reason than ever to start now.
Effective on FHA case numbers issued on or after April 1, 2009; FHA will only insure cash-out refinances when the loan to value is 85% or lower than the appraised value. Your appraised value is not based on what you feel your home is worth — it's based on what your neighbor's have sold their homes for in the past few months.
If you have owned your home for less than 12 months, FHA is limiting cash out refinances to which ever is lower: 85% of the appraised value or 85% of the original sales price.
According to HUD's Mortgagee Letter 2009-08, this is currently a temporary requirement:
"Given the continued deterioration in the housing market, and FHA's need to limit its exposure to undue risk, this reduction to the maximum LTV for cash-out refinances is being instituted on a temporary basis while FHA further analyzes the housing and mortgage industry as well as its own portfolio to determine whether permanent measures should be taken."
Well, what are you waiting for? You have two weeks as of today for FHA's expanded cash out guidelines of 95% loan-to-value with loan amounts up to $567,500 in King, Pierce and Snohomish counties. If your home is located in the State of Washington, and you're interested in refinancing, you can apply on line (under Favorite Links). By the way, I have been originating FHA mortgages for nine years and we have in-house FHA underwriters at Mortgage Master…as I mentioned, I can only help you if your home is in Washington.