If you are interested in refinancing your home, it can be difficult to discern which option will work best for you. And while there are several selections available on the market, many homeowners choose between cash-out refinance loans and FHA refinancing in Texas. But if you are having trouble discerning the differences between the two, you are not alone. That is why mortgage companies in Texas will educate you about each one to help you determine which home refinance option will be better for your circumstances.
The experts at BrightPath have the specialized skills to help you get the most out of your home equity.
About Cash-Out Refinance Loans and FHA Refinancing
According to mortgage companies in Texas, a cash-out refinance loan allows you to use your home equity to negotiate a new mortgage rate. Doing this enables you to borrow more than the loan balance so you can get the difference in cash. This money can be used for many purposes including home renovation, debt consolidation, making investments in your education, and more!
Much like with a cash-out refinance loan, FHA refinancing allows you to leverage your home equity. However, FHA refinancing is provided by the Federal Housing Administration. As a result, the guidelines, credit score allowances, and insurance premiums are different than those associated with a cash-out refinance loan.
Cash-Out Refinance Loans vs. FHA Refinancing
As reported by mortgage companies in Texas, one of the biggest differences between cash-out refinance loans and FHA refinancing is property restrictions. For FHA refinancing, the property that is being refinanced must be your primary residence, while a cash-out refinance loan can be taken out on primary, secondary, and investment properties. And while both cash-out refinance loans and FHA refinancing have loan-to-value ratios of 80%, FHA refinancing will accept lower credit scores than cash-out refinance loans. So, if you have the right amount of home equity but struggle with your credit score, FHA Refinancing may be the best choice for you.
Mortgage lenders in Texas advise you to factor insurance premiums into your decision when selecting between a cash-out refinance loan or FHA refinancing. If you get FHA refinancing, you will be required to pay upfront mortgage insurance and monthly insurance premiums. The upfront mortgage insurance is a single payment that must be made after closing that is 1.75% of the new loan. After that, you will have to pay monthly mortgage insurance premiums that equal 0.85% of the loan amount for the year. However, cash-out refinance loans do not come with insurance payments unless you exceed the 80% loan-to-value ratio. If the ratio is higher than that, you will be obligated to pay private mortgage insurance.
Ensure Your Home Refinance is a Success by Working with BrightPath
If you are uncertain whether a cash-out refinance loan or FHA refinancing will work better for you, the experts at BrightPath will give you the information you need to make your home refinance a success. As one of the best mortgage companies in Texas, they will provide you with world-class care and strong peace of mind that you have made the right choice for you.
Contact us today to schedule a consultation.
At BrightPath, the unparalleled professionalism of our experts will exceed your greatest expectations.