The FHA cashout refinance guidelines are allowing Orange County homeowners to refinance to low 30 and 15 year fixed rates. Especially for those homeowners who owe more than $417,000 on their home, FHA guidelines are far more lenient than the standard Fannie Mae guidelines. FHA underwriting guidelines are more flexible when it comes to loan to value, credit and FICO scoring, and debt to income ratios.
Orange County Homeowners with loans over $417,000 Benefit from FHA Guidelines
First, a quick explanation on what a ”high balance” loan is. A Conforming loan is home loan of $417,000 or less. However, in “high cost” areas of the US, such as Orange County and Los Angeles, Fannie Mae and Freddie Mac will purchase loans on Single Family Homes up to $729,750. Due to the collapse of the secondary market for Mortgage Backed Securities, Fannie and Freddie had to step in and provide an outlet for loans over $417,000. However, underwriting guidelines are more restrictive than for a standard Conforming loan of $417,000 or less. Fannie Mae will only allow a cashout refinance up to 60% loan to value. What many homeowners don’t understand is Fannie Mae and Freddie Mac consider combining a 1st and 2nd mortgage, where the 2nd was not part of the initial purchase of the home, to be a cashout refinance. So a homeowner who has a 1st mortgage of $350,000 and a Home Equity Line of Credit (not purchase related) with a balance of $100,000 (and yes, a Home Equity Line is a 2nd), will need to qualify for a cashout refinance even if they are not going to get any cash at the closing. Their property would need to be worth $750,000 in order to keep the new loan at 60% of the propertery’s value.
FHA to the Rescue
FHA to the rescue. The FHA loan limits for Orange County are also $729,750, and FHA guidelines for a cashout refinance, even for a loan ofer $417,000 allow for 85% of the property’s value. This means that using the scenario above, the property would only need to be valued at $530,000 to qualify for a refinance. Not only that, but most Orange County FHA lenders will allow FICO scores as low as 620, which is not possible on a High Balance Conforming loan.
VA Cashout refinance guidelines are even better for Orange County homeowners. VA guidelines will allow up to 100% loan to value, although most lenders cap it at 90% of the property’s value. For those Orange County homeowners eligible for a VA loan, now is the time to check it out.
With Orange County mortgage interest rates still low, but possibly on the rise in the next few months, now is the time to check into your options by contacting an Orange County FHA loan expert who can prepare customized 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.
Contact us for your Orange County FHA Mortgage:
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*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829
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We are not the FHA, VA, USDA, HUD or any other government organization. The content on this blog is intended for information purposes only. 
Great FHA loan refinance article. This is very informative and helpful for everybody. Thanks for posting Tim. Keep it coming.
We are very lucky to have the FHA program! Without the program there would be far fewer home owners at this point. The FHA has been and continues to be a blessing!