I am a homeowner and need cash, what are my options?
Tuesday, March 4th, 2008Q. I need to raise some cash. What are my options?
A. While homeowners generally need to stop thinking about their home as a piggy bank, those who have substantial equity and legitimate needs can take advantage of the current low rates to access some cash. Review your total financial picture and eliminate credit card (rates are going up) and installment debt with a cash-out refinance to take advantage of current low rates. Currently, Fannie Mae and Freddie Mac are allowing cash-outs up to a 90% LTV. However, the premiums charged if the LTV is over 70% can get quite pricey.
FHA will allow cash-out refis to 95% LTV. Lenders are scrutinizing cash-outs more closely, requiring that the transaction makes sense, either by getting down your overall debt or using the money for home improvements. Since last August, rates on both fixed rate seconds and equity lines, have skyrocketed. Equity lines now typically require a minimum 680 credit score, while fixed 2nd trusts will go as low as 660.
Some equity line lenders are freezing existing credit lines. The most common reasons given are: lowered home values, excessive lender risk and past late payments. The issue of late payments can be invoked if you have missed your payment date, but are still within your grace period.
The pendulum has swung to a market place requiring excellent credit, verifiable income, down payments, solid reserves and secure home values. In more volatile times like this, please rely on your real estate and mortgage professionals at Choice Finance and Choice Real Estate to help guide you through your options.
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Alex Echeandia, Choice Finance
