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What is a Cash Out Refinance?

A Cash Out refinance is the process of obtaining a new mortgage for your home, in order to access some or all of the equity you’ve built up in it.

Cash-out refinancing can be an effective way to get your finances in order, but it’s also easy to make mistakes that cost you money.

The good news is that there are plenty of ways for you to avoid these common cash out refinancing mistakes. If you’re thinking about getting a new loan, follow this guide so you know what steps to take next!


Options available

Conventional – Conventional Loans are the most common loan type in the US.  A Conventional Loans are the most competitively priced loans on the market for well qualified borrowers!  There are also many refinance options available for Conventional Loans that allow borrowers to lower their payment, shorten their term, or take cash out of the home.  All with very competitive pricing!

  • You can draw out no more than 80% of your home’s equity.
  • Low rates, low fees, and simple loan terms
  • No PMI when you own more than 20% equity in your home.

FHA – FHA Loans are by far the most helpful program for potential and current American homeowners.  With flexible credit qualifications, and low down payment options, FHA Loans make it possible for many Americans to take part in the American Dream of owning their own home.

  • You can draw out no more than 80% of your home’s equity.
  • Great rates and pricing for a variety of qualification ranges.

VA – Here at Handshake Home Loans Inc. we have incredible respect and gratitude for the men and women who served our country. We have listed some of the benefits of a VA loan.

  • Veterans are eligible to take out 100% of their home’s equity.
  • No Private Mortgage Insurance – VA loans are exempt from PMI requirements regardless of down payment or current equity in the home.
  • Flexible Credit Standards – Borrowers can typically qualify for VA loans with lower credit scores than those needed for other loan programs due to their relaxed credit requirements.

Reasons to do a Cash Out Refinance

There are plenty of reasons to consider a cash-out refinance. You can renovate your home, pay off high interest debts, consolidate other loans into one payment or buy something else, like a new home. When done responsibly, cash-out refinancing can be an effective way to get your finances in order.


Requirements

First, make sure that you have enough equity in your home. If you are performing a cash out refinance, you must have a Loan-to-Value ratio of 80% or less. If you are a Veteran of the United States Military, the Loan-to-Value ratio for VA loans is 100%.

Second, you must have a credit score at 620 or greater.

Third, most lenders require your Debt-to-Income ratio to be less than 50%


Is a cash out refinance right for you?

In conclusion, a cash-out refinance can be a powerful tool for you to pay down debt, buy a new home or even renovate your kitchen. If you want help determining if this is the right choice for your situation, give us a call and we’ll get started with our experts on finding out how much money will work best for you. Remember that timing is everything! We hope this post has been helpful in understanding the process of applying for a cash out refinance.

If you’re ready to take that next step, we can help! Our team of experts are here to help you accomplish your mortgage goals, whether it includes a cash out refinance or not. 

Fill out our online form and get connected with one of our mortgage experts today. They would be happy to answer any questions you have about your home loan options or provide more information on how refinancing could benefit you.

Get Started Today!

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    Our Handshake to you includes the promise that you will receive unmatched service,  with a fast closing, at a great rate. 

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