Cash Out Refinancing in Texas: Here’s How

Homeowners in Texas with equity in their home may opt for a cash out refinance. By borrowing against their home’s equity, homeowners can utilize their cash out refinance in Texas for debt consolidation, home improvements, or other investments. If you’re considering this type of loan and wondering about the requirements for cash out refinance, you can find answers in this short guide.

What Is a Cash Out Refinance?

Cash out refinance mortgages allow you to borrow funds against your home’s equity. You can use it however you wish, whether you want to add on to your home or invest in a business opportunity. The total amount you can borrow depends on how much equity you have in your home.

Called a Section 50(a)(6) loan, lenders pit your financial situation against the FHA cash out refinance requirements. So long as you meet these requirements, you can borrow up to a portion of your home’s equity to use without restriction.

Rules Regarding Cash Out Refinance in Texas

Texas cash out refinances have some rules and restrictions, including:

Closing Cost Limits

Lenders granting Texas cash out refinances cannot charge closing costs in excess of two percent of the loan’s amount. This total doesn’t account for appraisal fees, attorney fees, title insurance fees, or other fees from third-party closing affiliates.

No Second Mortgages

You can’t take out a FHA cash out refinance in Texas if you have any second mortgages or liens against your property. If you have any other home equity lines of credit (HELOC) on your home, you’ll need to pay it off before you can acquire a cash out refinance.

Limited Equity Amount

Regardless of how much equity you have in your home and how much you’ve paid off on your house, you cannot take out a cash out refinance for more than 80 percent of your home’s value.

Six Month Waiting Period

To qualify for a cash out refinance at all, you must have carried an existing mortgage for six months or more. If you’ve taken out a cash out refinance before, you’ll need to wait for a year before you apply again.

Potential Multi-Year Waiting Period

Certain situations require waiting periods before you can apply for a cash out refinance in Texas, including:

Waiting four years after a short sale
Waiting four years after a bankruptcy
Waiting seven years after a foreclosure

How Do You Qualify for a Cash Out Refinance in Texas?

To qualify for this type of loan, you’ll need to meet Texas’s cash out refinance credit requirements. Some of those requirements include:

Current Property Appraisal

Your property must meet cash out refinance appraisal requirements, which includes a new appraisal to ensure the property’s value remains the same as reported. This appraisal consists of a crucial part of the cash out refinance process.

Primary Residences Only

Homeowners can only take a cash out refinance on their primary residence, meaning the home they live in the majority of the time. Rental properties or vacation homes don’t meet that requirement, meaning you cannot take a cash out refinance loan against them.

Enough Financial Security

Although this loan goes up against your home’s equity, you still have to pass basic requirements to prove you can afford the loan payments. This includes ensuring that you have enough income to cover the payments and that you don’t have too many outstanding debts that would stop you from paying on the loan.

A High Enough Credit Score

To qualify for the cash out refinance credit score requirements, you need a score of 620 or higher. Some low credit scores might qualify you for conventional or government-backed home loans, but you won’t have the eligibility for FHA cash out refinances. We have more than several ways to help, regardless of your situation.

Paid-Up Mortgage Payments

If your current mortgage has outstanding payments, you can’t qualify for a cash out refinance.

Differences Between Cash Out Refinance Loans and Other Mortgages

While you may notice some similarities between cash out refinance loans and other home mortgages, you’ll find key differences in cash out refinances, including:

Different loan terms than regular mortgages
A lower interest rate due to less risk for lenders
The need for an appraisal, which some mortgage loans don’t require

How to Work with a Lender for a Cash Out Refinance

Whether you have a home improvement project on the books or need to consolidate debt, a cash out refinance in Texas offers an easy way to pull funds out against your home’s equity. Taking this step often includes research on the best cash out refinance lenders in Texas. Finding the right lender to work with helps you make informed decisions regarding how you take out and use your cash out refinance.

If you’re considering a cash out refinance loan in Texas, call Champions Mortgage at (281) 727-2500.