If you are struggling with debt or in need of a little extra cash, you may be scrambling to figure out how to earn additional income. But before you pick up a second job or start driving for a ride-share service, there may be another option worth considering. If you are a homeowner and meet certain criteria, according to mortgage lenders in Georgia, you can use your home equity for a cash out refinance to put additional money in your pocket. The mortgage experts at BrightPath will utilize their unparalleled industry knowledge to help you determine if a cash out refinance is the right solution for you.
What is a Cash Out Refinance?
When you cash out on a refinance, you leverage your home equity to receive a new loan rate that is higher than what you owe on your existing mortgage. The difference between these two amounts is then given to you in cash that can be used to pay off debt, remodel your home or make investments that will not incur any new debt. But in order to do this, you must meet certain qualifications.
Qualifying for a Cash Out Refinance
In order to qualify for a cash out refinance, you are required to meet the following criteria.
- Home equity percentage. When you submit your refinance application, mortgage lenders in Georgia will request an appraisal to estimate the value of your home. In order to be considered for a cash out refinance, you must have a minimum of twenty percent equity in the property.
- Debt-To-Income Ratio (DTI). Your debt-to-income ratio is the calculation of how much money you earn versus how much money you spend. Mortgage lenders in Georgia will require you to meet certain DTI amounts to ensure you can handle the debt you are taking on. The lower your DTI amount, the less likely you are to default on the loan.
- Credit Score. While the exact score you will need can differ based on the loan type and the amount of cash received, you will generally need a minimum credit score of 620 to be considered.
- Timely payments. Mortgage lenders in Georgia look for candidates that they can rely on, so you must make timely payments on the property for at least twelve months before you can qualify for a refinance.
How Loan-To-Value Ratio Differs Between Primary and Secondary Properties
Another factor mortgage lenders in Georgia will consider when you apply for a cash out refinance is the loan-to-value (LTV) ratio. According to Experian, this is the number that lenders use to determine how much risk they are taking on with the loan. There are requirements for what this amount can be, but these numbers differ based on the property type. For primary residences, the loan-to-value ratio is eighty percent, which is the percentage of the home’s equity that can be taken in cash. For secondary or investment properties, the loan-to-value ratio is seventy five percent.
Work with BrightPath to Determine if a Cash Out Refinance is the Right Option for You
The experienced loan officers at BrightPath will provide you with comprehensive analysis and answers to determine if you qualify for a cash out refinance. Contact BrightPath today to book your consultation.
When you work with BrightPath, you are guaranteed to find the right mortgage that meets your needs.