Table of Contents
- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Texas Cash-out Refinance Update
With the rising real estate market, homeowners can see a significant rise in their home equity.
This means they have access to more money, which they can use for their significant expenses from their home equity — one of the most common ways to tap into your home equity is through cash-out refinance.
The guidelines for cash-out refinance differs from state to state. In this post, we will discuss the most recent update for the texas cash-out refinance 50 (A)(6) loan.
Texas Cash-out Refinance 50 (A)(6) Definition
A texas cash-out refinance is just like any other cash-out refinance where you take equity out of your home equity in the form of cash. After the closing of the refinance, you receive the money into your account.
These funds could be used for any purpose. However, we would always suggest you back your reason for doing this. Because eventually, you are putting the home at risk of losing if you are not able to repay the money.
The most common reasons for a borrower to take a cash-out refinance are debt consolidation, home improvements, student loan payoff, and real estate investment.
How Much Equity Can You Borrow?
The Texas cash-out refinance 50 (A)(6) allows the borrower to borrow up to 80% loan to appraised value on your primary residence. For example, your home value is $150,000, and your current mortgage balance is $80,000.
The maximum loan allowed is 80 % of $150,000, which is $120,000. So when you refinance with texas cash-out for $120,000, $80,000 goes towards paying off your underlying mortgage.
And you have $40,000 as cash in your account after the closing.
All closing costs can be rolled into the loan; that way, the borrower doesn’t have to make any upfront payment for the closing costs.
Can I Refinance After I Do A Cash-Out?
This was one of the significant changes in texas cash-out refinance, which was rolled out in January 2018.
Before January 2018, the rule for this program was, once you take a cash-out refinance, your loan was always considered to be a cash-out loan.
Since the interest rate on a cash-out refinances is slightly higher than the rate, and term refinances, the borrowers would lose the benefit of converting the mortgage to a no cash-out loan.
The new rule states once you take a cash-out refinance, you would have to wait for 12 months before you could refinance again.
The positive thing about this rule is, after 12 months from your cash-out refinance, you can change the loan to a no cashout-loan or a rate and term refinance. Unless you opt for a cash-out refinance again after 12 months.
How Long Does The Loan Process Take?
The loan process for a texas cash-out refinance 50 (A)(6) is consistent with any other home loan. The average closing time for the refinance is 30-45 days. However, it entirely depends on your documentation and underwriting.
The only waiting time is 12 days from the time of your application, which may not be considered as extra time as your loan officer can get everything streamlined in the meanwhile.
After the loan is closed, there is a three days write-off recession period which is the time given to the borrower to go through the closing disclosure, and making sure you are getting what you were promised.
What Were The Key Changes In 2018?
The first and essential change was that the borrower could convert the cash-out refinance to a rate and term refinance after waiting for 12 months from the cash-out refinance closing date.
Another change was that the cashout can now be done on a property that has an agricultural exemption.
According to the new update to this program, the maximum fees limit on loan cannot be more than 2%, except for appraisals, a survey, and title insurance.
Conclusion
Before January 2018, the texas cash-out refinance 50 (A) (6) was confusing and challenging not only for the borrower to qualify but also for the lenders to process.
After the updated changes, now more borrowers can be eligible for this program and there are more lenders to process the loan with more flexibility.
If you want to know more about qualifying parameters for this program, please get in touch with your trusted loan officer to get more accurate information.
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