28
Jul
By First Rate Financial Group
Mortgage

FHA Cash-Out Refinance – Are You Eligible?

FHA Cash-Out Refinance – are you Eligible?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:

  • Minimum 600 credit score
  • Maximum 43% debt-to-income ratio
  • Proof you’ll occupy the property as your primary residence
  • Stable income and employment for 2 years
  • Over 20% home equity
  • Make at least 12 months of timely payments on your current loan

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:

  • Home renovations, repairs, or additions
  • Debt consolidation
  • Pay for college or prepay for a college education
  • Consolidate a first and second mortgage
  • Save as an emergency fund

How to get an FHA Cash-Out Refinance

Securing an FHA cash-out refinance is simple using these steps:

  • Complete an application and get pre-approved by a lender, compare your options and see if you qualify for any other cash-out loan including a conventional cash-out refinance
  • Decide which loan you want, including if you want a fixed-rate or ARM
  • Provide the documentation required including paystubs, W-2s, tax returns, asset statements, and proof of employment
  • Arrange an appraisal time with the appraiser (you’ll need a new appraisal)
  • Work with the loan officer to clear your conditions
  • Close on the loan and receive your cash

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!

27
Jul
By First Rate Financial Group
Mortgage

Homeownership And The American Dream: Is It Changing?

Homeownership And The American Dream: Is It Changing?There are a few parts of American culture that people believe define this country. One element is the dream of homeownership. There is a strong belief that people need a place to call home. Therefore, since the dawn of this country, the government has tried to incentivize people to purchase a home.

At the same time, there are some people who are looking at the younger generation, wondering if this American Dream is starting to change. Is homeownership still a part of the American Dream?

Americans Still Believe In The Idea Of Homeownership

Hard work and owning a home appear to be inseparable. There is still a belief that as long as people work hard and save money, they can fulfill the American Dream by buying a home. Real estate professionals regularly take surveys that show that people still want to be a homeowner for the sake of owning a home. While it is true that owning a home provides more control and creates investment opportunities, owning a home still has an allure to people that is undeniable.

Millennials Want To Own A Home As Well

Millennials appear to believe most strongly in owning a home, indicating that this is still a part of the American Dream. Even though some people thought that millennials were simply going to rent forever, this is not the case. The reality is that many young adults have not purchased a home because they could not afford one. Student loans and a lack of wage growth compared to housing increases simply made it harder. With interest rates lower than they ever have been in the past, many young adults are ready to make the jump to purchase a home.

Homeownership Is Still A Part Of The American Dream

Ultimately, many millennials simply put off the idea of getting married and having children, so they put off the idea of homeownership as well. Now that this milestone has arrived, there are many young adults who are looking to purchase a home for the first time. This indicates that owning a home is still a key part of the American Dream.

26
Jul
By First Rate Financial Group
Financial Reports

What’s Ahead For Mortgage Rates This Week – July 26, 2021

What's Ahead For Mortgage Rates This Week - July 26, 2021Last week’s economic reporting included readings from the National Association of Home Builders Housing Market Index, data on sales of new and previously-owned homes, and weekly reports on mortgage rates and jobless claims.

NAHB: Affordability, Shortages of Labor and Materials Impacting U.S. Housing Markets

Housing market conditions are changing according to July’s Housing Market Index produced by the National Association of Home Builders. Although the HMI reading declined by one point in July, ongoing trends including labor shortages, higher prices for building materials, and affordability impacted builder confidence in overall market conditions. July’s index reading was 80 as compared to June’s reading of 81 and the expected reading of 82. Housing Market Index readings over 50 indicate that most builders surveyed were confident about housing market conditions.

Component readings of July’s Housing Market Index included builder confidence in current market conditions, which fell one point to 86;  builder confidence in housing market conditions for the next six months rose two points to 81. Builder confidence in prospective buyer traffic in single-family housing developments fell six points to an index reading of 65. Buyer traffic readings often fell below 50 before the pandemic.

Regional builder confidence readings for housing market conditions were mixed in July. The Northeastern region’s reading was four points lower at an index reading of 75. The Midwest index reading was one point lower at 71. The builder confidence reading in the South was unchanged at 85 and the West’s builder confidence reading dropped two points to 87.

Previously-Owned Home Sales Rise in June

The National Association of Realtors® reported a seasonally adjusted annual pace of 5.86 million sales of previously-owned homes in June. Analysts expected a reading of 5.93 million sales; May’s reading for existing home sales showed an annual pace of  5.78 million homes sold.

Demand for homes since the pandemic started is driven by home buyer demand for homes in less congested suburban and rural areas. Although demand for homes encourages home builders, it also increases home prices when multiple buyers submit purchase offers on each available home. This drives home prices higher and sidelines first-time and moderate-income buyers. High-demand areas are also experiencing more cash offers, which creates difficulties for buyers needing to finance a home purchase.

Housing Starts Rise in July as Building Permits Issued Fall

U.S. housing starts rose in June according to the Census Bureau. 1.64 million starts were reported on a seasonally adjusted annual basis. 1.59 million starts were expected based on 1.55 million starts reported in May. Building permits fell to 1.60 permits issued in June; analysts expected building permits issued in June to match May’s reading of 1.68 million building permits issued.

Mortgage Rates and Jobless Claims

Freddie Mac reported lower rates for fixed-rate mortgages with 30-year fixed rates averaging 10 basis points lower at 2.78 percent. Rates for 15-year fixed-rate mortgages were also 10 basis points lower and averaged 2.12 percent. Rates for 5/1 adjustable mortgages rose two basis points on average to 2.49 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

419,000 new jobless claims were filed last week as compared to 368, 000 initial jobless claims filed in the previous week. 3.24 million continuing jobless claims were filed as compared to 3.27 million ongoing jobless claims filed in the previous week.

What’s Ahead

This week’s scheduled economic reporting includes readings on home prices from S&P Case-Shiller Home Price Indices, data on pending home sales and new home sales will be released along with the post-meeting statement of the Fed’s Federal Open Market Committee. Fed Chair Jerome Powell is scheduled to give a press conference after the FOMC statement is released. Weekly readings on mortgage rates and jobless claims will be published along with the University of Michigan’s Consumer Sentiment Index.