FHA will now require a second appraisal for all cash-out refinances where the LTV, exclusive of the UFMIP, will exceed 85 percent of the appraiser’s estimate of value.  This second appraisal requirement applies regardless of the loan amount or the location of the property, i.e., whether the property is in a “declining area” or is not.  This second appraisal requirement for cash-out refinances is effective for all case number assignments on or after January 1, 2009

Borrowers who are delinquent or in arrears under the terms and conditions of their current mortgage(s) are not eligible for a cash-out FHA refinance.

The subject property must have been owned by the borrower as his or her principal residence for at least 12 months preceding the date of the loan application.  If the borrower has not owned the the property for a minimum of 12 months, the FHA refinanced insured new mortgage is capped at 85 percent LTV.  In such cases, the FHA mortgage amount must be calculated using the lesser of the appraised value or the original sales price of the property multiplied by 85%.

If said property is encumbered by a mortgage, the borrower must have made all of his/her mortgage payments within the month due for the previous 12 months, i.e., no payment may have been more than 30 days late and is current for the month due.  

Applies to owner occupied properties only.

The property that is security for the FHA refinance mortgage must be a 1- or 2-unit dwelling.

Loan amounts may not exceed the maximum loan limits for the area.

Subordinate financing may remain in place, but subordinate to the FHA refinanced insured first mortgage, regardless of the total indebtedness or combined loan-to-value ratio, provided the homeowner qualifies for making scheduled payments on all liens.

All borrowers must credit qualify.

Any co-borrower or co-signer being added to the note must be an occupant of the property. Non-occupant owners may not be added in order to meet FHA's credit underwriting guidelines for the mortgage.

If a homeowner is pursuing a cash-out FHA refinance and the loan balance exclusive of FHA’s upfront mortgage insurance premium will exceed $417,000, the loan-to-value may not exceed 85 percent of the appraiser’s estimate of value.