| The term conventional loan includes loans under the | | | | According to the FHA, 1-2 unit primary residences may |
| current lending limits set by the Federal National | | | | cash-out up to 95% of the estimated property value. |
| Mortgage Association (FNMA) and the Federal Home | | | | For other property type the maximum cash-out is |
| Loan Mortgage Corporation (FHLMC), commonly | | | | 85%. This is at least 5% more than on a conventional |
| known as Fannie Mae and Freddie Mac, respectively. | | | | refinance loan. And, you do not have to have an |
| A Federal Housing Administration (FHA) loan is a loan | | | | existing FHA loan in order to get FHA refinancing. |
| based on an insurance program that enables you to | | | | While FHA loans are funded by financial institutions |
| buy a home with a down payment of as low as 3%. | | | | such as mortgage centers or banks like conventional |
| FHA is administered by Housing and Urban | | | | loans, it does not actually lend money but rather |
| Development (HUD). It is one of two government loan | | | | guarantees a loan in case of borrower default. As a |
| programs available to borrowers. The other is a | | | | result, there is less financial risk to the lender, allowing |
| Veterans Administration (VA) loan, available only to | | | | them to offer lower rates to borrowers than rates |
| veterans of the military service. | | | | offered by conventional refinancing. And, FHA has the |
| The FHA loan program, similar to conventional loan | | | | most forgiving credit criteria--FICO scores of 580 (east |
| programs, allows for mortgage refinancing of owner | | | | coast), 560 (Midwest) and 520 (west coast) being |
| occupied properties as fixed mortgage rate loans and | | | | considered acceptable. |
| adjustable rate mortgages (ARMs). Similar to | | | | Similar to conventional loans, FHA mortgages require |
| conventional refinances, FHA refinances can be used | | | | mortgage insurance. Conventional loan mortgage |
| for such purposes as:o Home Improvements and | | | | insurance is cancelable under most circumstances |
| Renovations.o Debt Consolidation, including | | | | once you build at least 20% equity in your home. The |
| consolidating a home equity loan (second mortgage), if | | | | FHA states that, in most cases, FHA insurance will |
| 2nd loan is less than 1 year old.o Large Purchases.o | | | | drop off after five years or when the remaining |
| Schooling.o Vacation.o Investment(s), including second | | | | balance on the loan is 78 percent of the value of the |
| home or vacation home purchase. | | | | property, whichever is longer. |