For the last few years, one of the most popular Arizona FHA loan programs was the Arizona FHA 95% cash out loan. This loan program would allow eligible homeowners to get up to 95% of their homes value in cash to be used for pretty much any reason they wanted (pay off bills, home improvements, vacations… you name it).
For any Arizona FHA mortgage loans where the FHA case number is dated April 1, 2009 or later, the maximum cash out allowed has been lowered to 85% of appraised value. Details were released a few days ago in the official FHA Mortgagee Letter 2009-08 (it opens as a Word document).
A few highlights of the new FHA 85% cash out program include:
- It is officially on a “temporary basis” until HUD has a chance to analyze and review it’s portfolio and the housing market. That said, I would expect this to be in place for quite a while.
- The property must have been owned by the borrower for at least 12 months in order to qualify for 85% of the appraised value. If owned less than 12 months, the maximum loan is the lesser of 85% of the appraised value or the sales price.
- A second appraisal is required if the loan amount is higher that $417,000 and the property is in an area of declining values.
- Three and Four unit properties must still pass the self sufficiency test in order to be eligible.
- You must be current on your mortgage – delinquent borrowers are not eligible for the 85% cash out program.
Many people have been expecting this change – so it didn’t really come as a surprise. There is starting to be talk about the FHA insurance fund having financial problems with the amount of money in the insurance fund and the amount of money being paid out in claims (or projected to be paid out) — and this is just one way that FHA is attempting to reduce their exposure to these possible future claims.