PA FHA Cash-Out Refinance

PA FHA Cash-Out Refinance, is often the best route for Pennsylvanians to go when refinancing their homes to consolidate debt, pay off a 1st and 2nd mortgage (be it a home equity loan, line of credit, or equity note), or to simply pull out some cash. Cash can be used for any reason, be it for home repairs, investments, or college tuition. The main reason a PA FHA Cash-Out Refinance often makes the most sense is because Fannie Mae loans often have high pricing adjustments for credit scores falling under 740, and loan to values over 60%. A loan-to value is the amount of money borrowed, divided by your homes appraised value. With a PA FHA Cash-Out Refinance, fewer pricing hits apply all the way up to a loan against 85% of a home's value.

Many consumers hear PA FHA Cash-Out Refinance and the first thought many consumers have is "I don't want to pay monthly mortgage insurance and I don't want a Mortgage Insurance Premium of 1.75%". While it is true you WILL have both monthly MI and a Mortgage Insurance Premium on ALL 30 Year PA FHA Cash-Out Refinances, even those below an 80% Loan to Value, it may be more cost effective to go with an PA FHA Cash-Out Refinance rather than a traditional Fannie Mae loan. Keep in mind as well, a 15 year FHA loan may not have monthly mortgage insurance if the loan-to-value is under 90%. The Up-Front MIP is still required. Here are a couple comparisons of 30 year loans based on pricing as of 9/11/2009*:

#1: 30 Year Fixed Rates, 200k loan, 250k Home Value, Credit Score 639

FHA Loan 5.25% (5.83% APR) 0 pts 1.75% MIP .55% Monthly MI

Fannie Mae Loan 5.625%(6.068 APR) 4pts N/A MIP NO MI

Fannie Mae pricing adjustment: 5.75 points, credit score under 640 to an 80% LTV

#2: 30 Year Fixed Rates, 200k loan, 250k Home Value, Credit Score 675

FHA Loan 5.25% (5.79% APR) 0 pts 1.75% MIP .55% Monthly MI

Fannie Mae Loan 5.625%(5.88% APR) 2.5pts N/A MIP NO MI

Fannie Mae pricing adjustment: 4 points, credit score under 680 to an 80% LTV

These 2 cases can be argued to be a bit extreme, but the point is made: rates advertised often for Fannie Mae rates often don't take into account credit score and loan-to-value adjustments made on loans these days. This is particularly true for cash-out loans, even if you are just paying off a non-purchase money 2^nd lien. Couple this with the fact that FHA loans allow for a PA FHA Cash-Out Refinance up to 85% of a home's value and allow credit scores as low as 620 currently, and you will find an FHA loan will benefit more consumers. Another option gaining more notice as of late is the FHA 5/1 ARM as well, which offers interest rates in the 4's currently for PA FHA Cash-Out Refinance financing as well.

If you are considering refinancing, contact a mortgage professional who knows their way around the guidelines and pricing adjustments for various programs.

* Not a commitment to lend. Rates for illustrative purposes only. Other programs available. Equal Housing Lender. Licensed in CA,CO,CT,DE,FL,GA,MA, NJ, NY,PA,TX,SC,VA

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