FHA Cash-Out Guidelines Change – 85% LTV Effective 4/1/09

A letter went out to lenders this week from the Federal Housing Administration (FHA), which plans to make it tougher for borrowers to secure a cash-out refinance mortgage.

Until now, the FHA has approved cash-out refinances for homeowners who have at least 5% equity in their properties and a record of on-time payments for at least one year.

However, beginning April 1, this type of refinancing will be restricted to borrowers with at least 15% equity in their homes.

This is a "temporary change" said current FHA Commissioner Brian D. Montgomery, while the FHA determines whether "permanent measures" should be taken.

In other words, call your lender today if you are contemplating a cash-out mortgage in the near future. Mortgage companies only have until the end of the month to make an application before the new rules are implemented.