Since 2013, the number of cash-out refinances on FHA-backed loans has skyrocketed an incredible 250%—and, in hopes of reversing the trend, the Federal Housing Association is changing the requirements for refinancing.
According to a recent article in HousingWire, effective September 1, 2019, the FHA will be changing the loan-to-value requirements from 85 percent to 80 percent. This will reduce the number of mortgage holders who qualify for a cash-out—and, according to the FHA, “strengthen the equity position of cash-out refinances and reduce loss severities in the event of default, stay ahead of any potential future shift in the housing market and better support FHA’s mission of providing access to sustainable homeownership that builds equity.”
What does that mean for you? If you’ve been considering refinancing, the changing regulations may have an impact on your ability to cash-out, or how much you are able to cash-out—so before you move forward with the process, make sure your loan-to-value ratio is at 80 percent or below.