THE MORTGAGE BROTHERS SHOW
FHA & VA Updates
In this episode we are covering a few quick updates to the FHA and VA. There are two major refinance updates:
- Starting September 1st 2019 FHA cashout refinances will be limited to 80% loan-to-value. Prior to this, FHA cashout refinances were allowed up to 85% loan-to-value.
- The VA agency has announced that cashout loans exceeding 90% loan-to-value will officially be ineligible for VA loans starting November 1, 2019 (so that essentially means that VA cashout refinances that close after September 30th 2019 will be limited to 90% loan-to-value). VA cashout refinances were previously allowed up to 100% loan-to-value prior.
*The following transcript has been edited for clarity.
Eddie Knoell — I’m Eddie Knoell.
Tom Knoell — And I’m Tom Knoell.
Eddie — We’re the mortgage brothers everyone, and welcome to our podcast. Today is an update day.
Tom — It’s a program update day. Boy, I wish I had marshmallows in my mouth so I could say that really fast.
Eddie — We’re going to try to keep it real simple. This is about an FHA update and a VA update.
Tom — Let’s jump into the FHA. Before we got on the podcast, we were talking about content, and our content really is driven for buyers and sellers out there, and for agents to pass on to their buyers and sellers. So even if you’re an agent driving around, like, why do I really need to have an FHA update on a refi program? Well, it’s because your seller or your buyer one day may end up wanting to know. And also we want to let you know, these are the things that we keep up on.
Eddie — That’s right.
Tom — So when we’re working on pre-qualifying your clients that we’re constantly keeping in mind. I mean this FHA update, I have two borrowers that are literally being affected by it today. And we’ve locked their loan in over the past probably three or four days, and I’ll just jump right into it. So FHA, one of the beauties of it has been over the years.
So for the past 18 years, one of the big benefits of FHA is you can do a cash out refinance up to 85% LTV. That’s huge. 85%. Conventional is 80%. So for the last 18 years, it’s been a no brainer. You can go to the FHA product. Again, there’s disadvantages to FHA over or compared to a conventional, but for people that just want cash out, FHA has always been a good place to go. As of September 1st, that is going to be the same as conventional.
So basically FHA, cashout refi loan-to-values will be the exact same as conventional. So I do wish that we were passing on a bit of good news. But it’s basically the government tightening restrictions on some of the loan parameters. We want to let you know, our audience, that that’s one of the big changes to keep in mind. So FHA is reducing their loan devalue on cashout refis from 85% to 80%.
Eddie — Good. And the next update is… Again, for a VA financing cash out refinances on VA will now be limited to 90% loan-to-value. You could have received cashout on a VA refinance up to 100% loan-to-value. It was very common for a veteran if they wanted to do a cash shot.
Sometimes they didn’t go to a hundred but they would go to 95% loan-to-value. So starting, loans that close… So VA loans that close after September 30th, 2019 will be now limited to 90% loan-to-value. I have a couple of customers, I know it’s going to affect them. They wanted to cash out. There were going to do some repairs, and this update is going to ruin their chances to take that cash out using the VA loan. But again, it’s VA and FHA both taking a step back and reducing the risk on these cashout refinances. They noticed a lot of refinances going on out there, and I think they’re just trying to curb the risk.
So that’s the update for you all. And if you liked this content, you want to get more of it, remember to subscribe to the channel and you’ll be notified when we do update.
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Signature Home Loans, LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Signature Home Loans NMLS# 1007154, NMLS# 210917, and 1618695. Equal housing lender.