FHA Streamline Refi - Cash back?

[Anonymous]

with a FHA streamline refinance, is there opportunity for cash back?  I recently closed on my home and I know I need 6 consecutive on-time mortgage payments, so I wanted to refi at that time for a lower rate and perhaps cash back if possible to do some little house projects.  Does anyone know if this is possible?  Thanks. 

[ShanetheMortgageMan]

You can get up to $500 cash back on an FHA streamline.  If you want to take more cash out than that, FHA caps a cash out refinance to 80% of your home's value (used to be 85% until recently).  There are conventional loan programs that will allow you to take cash out above 80% of your home's value, and you could also look into getting a 2nd mortgage (home equity loan or home equity line of credit).

[Anonymous]

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@ShanetheMortgageMan wrote:

You can get up to $500 cash back on an FHA streamline.  If you want to take more cash out than that, FHA caps a cash out refinance to 80% of your home's value (used to be 85% until recently).  There are conventional loan programs that will allow you to take cash out above 80% of your home's value, and you could also look into getting a 2nd mortgage (home equity loan or home equity line of credit).

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Thanks!  I was certainly looking into getting more than $500 back.  I'm not all that familar with this, as I am pretty new.  What exactly does it mean to have a cap cash out refinance to 80% of my homes value?  

[ShanetheMortgageMan]

So different types of transactions (purchase vs. cash out refinance vs. rate/term refinance) have different loan-to-value's (LTV's for short) that the new loan amount can go up to. 

On a refinance the LTV is calculated by taking the new loan amount divided into the home's appraised value.  So for example a $151,000 loan amount on a $218,000 appraised value would have an LTV of 69.26% ($151k / $218k = .6926).

With FHA when you refinance and take cash out it is limited to 80% LTV, and if you aren't taking cash out then it's limited to 97.75% LTV.  So since you are talking about taking cash out, your new loan amount will be limited to 80% of your home's appraised value.  To determine how much cash back that'd give you at closing, you'd need to deduct the payoff on your current mortgage + the closing costs associated with the refinance from the new loan amount.   So in the above example of a $218k appraised value, you could get a new loan up to $174,400.  Let's say your existing mortgage payoff amount is $160k and the new loan closing costs total $5k, then you'd get $9,400 cash back at closing ($174,400 - $160,000 - $5,000 = $9,400).  It's a little more involved than that but that is the general gist of it.

With FHA financing, to use an appraised value that is higher than what you purchased the home for, you need to have owned the home for at least 12 months.  

[MauiMan85297]

Up to $500 is correct but you have other avenues of getting cash, if they were to close your loan let's say in December then you wouldn't make the Dec 1st payment and are required by law to be given 30 days to first payment (hence skipping Jan payment) plus you would get an escrow refund check back 2-3 weeks after your loan funds.

Example: $1,500 monthly mortgage payment

Escrow balance: $1200

$3,000 savings of 2 payments (that's if lender gave enough lender credit to cover closing costs and impounds)

$1,200 refund check + up to $500 cash back from the SL loan.

$4200-$4700 effective cash out !!!