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Orange County homeowners are learning quickly that FHA has more lenient underwriting guidelines when it comes to refinancing. FHA is flexible for purchase loans as well, but when it comes to a refinance, especially a cashout refinance, FHA (surprisingly to some) is not only the best, but in many situations, the only way to go.

Advantages for Orange County Homeowners Refinancing into an FHA Loan

• FHA has more flexible credit and FICO guidelines than Conventional Fannie Mae guidelines
• FHA has more flexible guidelines for cashout refinancing
• FHA allows for higher debt to income ratios than Fannie Mae
• FHA does not have multiple pricing adjustments for loan to value, FICO, refinance type (cashout), and property type (condo) like Fannie Mae does.

Orange County Homeowners will Qualify for an FHA Loan More Easily than Fannie Mae

Most Orange County FHA lenders will allow FICO scores as low as 620. Also, with re-established credit, FHA allows financing to people only 2 years after a discharged bankruptcy. Cashout refinance guidelines are more flexible for FHA. FHA will allow a cashout refinance up to 85% of the properties value. Fannie Mae only allows up to 80% of the properties value when the loan amount will be $417,000 or less. But when the loan will be over $417,000 but under $729,750, Fannie Mae will not allow financing over 60% of the properties value. Also, what many homeowners don’t realize, is that if a 1st and 2nd mortgage are being combined into one loan and the 2nd mortgage was not part of the initial purchase transaction, then the resulting loan is considered by Fannie Mae to be a cashout refinance. This means, if an Orange County homeowner has a 1st mortgage of $400,000 and a 2nd of $200,000, their property would need to be worth over $1,000,000 to combine into one mortgage under Fannie Mae guidelines. To fit within FHA guidelines, the property only needs to be worth $705,000. Some Orange County homeowners are opting for the FHA 15 year fixed program, which does not require monthly mortgage insurance on a cashout refinance. (The FHA 15 year fixed does not have monthly mortgage insurance when the loan to value is 90% or better, which is automatic on a cashout refinance.) **For those Orange County VA loan eligible homeowners , it gets even better. VA will allow a cashout refinance up to 90%, and with no monthly mortgage insurance.**

Recently, Fannie Mae decreased their maximum allowable debt to income ratios. This decrease can have a dramatic effect on the amount of loan borrowers will qualify for. FHA has not made changes. It is not uncommon for an Orange County FHA borrower to get approval with a total debt to income percentage as high as 55%. Also, even if the debt to income ratios are too high, it is possible to add a “non occupying co-borrower”, which Fannie Mae would not allow. And to top it all off, Orange County FHA mortgage rates are just as low as Fannie Mae mortgage rates.

Orange County homeowners who have tried been unable to refinance, should give it another try. But this time, make sure to talk to an Orange County FHA loan expert who can prepare customized FHA loan scenarios based on your goals and qualifications.

Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan.  877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829