FHA Cash Out Refinance to 85% (one appraisal) or 95% (two appraisals)

Update to the FHA 203(b) Loan Program – New Second Appraisal Requirement for Cash Out Refinance Transactions and Maximum Mortgage Calculations for Refinance Transactions

As a result of Mortgagee Letter 2008-40, published by HUD on December 23, 2008, and effective with FHA Case Numbers assigned on or after January 1, 2009, FHA will require a second appraisal for all cash-out refinances where the LTV, exclusive of the UFMIP, will exceed 85% of the appraiser’s estimate of value.

Additionally, the Mortgagee Letter announces revisions to the FHA loan amount calculations used to determine the maximum mortgage amount effective with case numbers assigned on or after January 1, 2009.

See the chart below for maximum LTV and UFMIP based on transaction type:

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.

For FHA program details visit our FHA Program page of our site.