Refinance Options

CASH-OUT REFINANCE
(AKA Texas 50(a)(6) Loan)

In Texas, a homeowner can refinance and receive cash back for up to 80% of the equity in their home. With equity levels rising nationwide, many Texans will easily meet this criterion.   Although this type of refinance increases your overall debt, the good news is how you spend your cash is strictly up to you.  In other words, a Cash-Out refinance affords you the opportunity to do a myriad of things that you may be considering but do not have the cash for i.e., pay for renovations, college tuition, more real estate, etc.  You get to choose!

 

Cash-out Refinance Eligibility. 

If you have decent credit and more than 20% home equity, you should be able to refinance your mortgage and pull cash out of your home. The process for a Cash-Out refinance is the same as most other mortgage products approximately 30-45 days).  All applicants must meet the following requirements:

  • Proof of Verifiable Income and Employment History. Applicants must be able to prove sufficient income to support the new house payment and other qualifying debt (see DTI requirements below).  
    • A Minimum Credit Score of 640. In general, you should strive for a credit score of 640 or above when applying for a Cash-Out Refinance. Texas Cash-Out Refinances are ONLY available with conventional mortgages.  FHA, USDA and VA mortgages are not allowed. As with any mortgage loan, the higher your credit score, the lower your interest rate.  
  • Down Payment Requirement. With a Cash-Out Refinance, there is no down payment requirement since you will be using the equity in your home.
  • Debt-to-Income Ratio (DTI) Requirement.  Cash-Out Refinances typically have a maximum DTI of 43%.  Your DTI is calculated by totaling the minimum payments on all your recurring monthly debts (student loans, credit card and installment payments, as well as your new proposed house payment), divided by your monthly gross income – expressed as a percentage. For example, if your new house payment is $5,000 per month, your car payment is $879 per month, and your minimum monthly credit card payment is $526, your total monthly debt is $6,405.   If your gross income is $15,200 per month, then your DTI is roughly 42% (6,405 ÷ 15,200 = 42.13).
  • Mortgage Insurance Requirement.  Because you are required to leave 20% equity in your home, there is no mortgage insurance included in your monthly payment.
  • Eligible Properties. The Texas Constitution regulates cash out home equity loans on primary residences. These rules do not apply to 2nd homes or investment property.   

 

Applying for a Cash-Out Refinance

It’s easy. To get started, you will want to gather the following (that applies to you):

  1. Proof of income and employment (pay stubs, tax returns, W-2 statements, retirement statements Social Security statements, child support and alimony documentation etc.).
  2. Documentation of financial assets (bank statements, 401k statement, document of income from investments, etc.).
  3. Most recent Pay off for your current mortgage.
  4. Identity information such as your unexpired Driver’s License and Social Security card.

If you have questions and would like to speak to someone right away, give us a call at 832.946.8400.

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