Texas cash-out refinances mortgage guidelines differs from any other state in the nation. We will discuss and cover the differences in the agency mortgage guidelines when it comes to Texas cash-out refinance mortgage guidelines.

If you’re a homeowner in Texas and you’re looking to refinance your home loan, there’s a lot to consider. One of the most important things to think about is what type of loan you want. There are many different types of loans available, but not all of them will be right for you. It’s important to choose the right loan so that you can get the best rate possible. One type of loan that you may want to consider is a cash-out refinance.

How Cash-Out Refinance Work in Texas?

So what is a cash-out refinance? In short, a cash-out refinance is when you take out a new loan to replace your existing mortgage—but unlike a traditional refinancing, you actually receive cash back at closing. The amount of cash you receive can be used for any purpose you see fit, from home improvements to consolidating debt.

A cash-out refinance allows you to take cash out of your home equity when you refinance your home loan. This can be a good way to get a lower interest rate on your loan. If you’re considering a cash-out refinance in Texas, there are a few things you need to know. First, you’ll need to make sure that you have enough equity in your home. You’ll also need to find a lender who offers competitive rates and fees.

Taking cash out of your home, whether it’s a refinance or a home-equity line of credit can be very confusing.  You’re going to want to make sure to contact a licensed loan officer who has completed many of these transactions. Loan officers and support/operations staff at Capital Lending Network, Inc. are experts in Texas refinancing laws and regulations. Our licensed loan officers will assist with cash out or rate and term refinances. This blog will explain the ins and outs of obtaining a cash-out loan in Texas or Texas (a)(6) loan.

Mortgage Lenders In Texas Specializing in Cash-Out Refinance

Texas does not allow homeowners to do a cash-out refinance the mortgage on FHA and Conventional loans. This holds true no matter how much equity a homeowner has.  Homeowners needing a cash-out to refinance mortgages can only do it with conventional loans and/or non-QM mortgages. Laws have changed over the past few months, which only blurs the lines further. The rule of thumb when it comes to Texas (a)(6) refinancing is you must keep at least 20% of the equity in your home.

This only applies to your primary residence. If you own investment property or a second home in Texas the (a)(6) rule does not apply. Let’s focus on your primary home. The maximum loan amount for a cash-out refinance in 2022 is $647,200 for the entire state. In this article, we will discuss and cover Texas Cash-Out Refinance Mortgage Guidelines on primary owner-occupant homes.

Case Scenario On Texas Cash-Out Refinance Home Mortgage

Let’s take a moment and go over an example:

• If your primary home is worth $300,000, the maximum loan amount will be $240,000
• Texas (a)(6) law prohibits any dollar amount above 80% loan to value

In this example, the payoff amount of your existing lien plus closing costs must be lower than $240,000.

• First mortgage = $175,000
• Closing Costs = $3,000
• Cash-out needed =$25,000
• Total = $203,000
• Since that amount is under $240,000 or 80% LTV- you will pass Texas (a)(6) equity requirement

Maximum Fees Texas Lenders Can Charge Borrowers On Cash-Out Refinance Mortgages

The rules used to be “once cash out, always a cash-out” but those days have changed. In the year 2018, Texas changed some laws such as lowering the 3% fee cap Down to a 2% fee cap. This was put into place to protect borrowers from predatory landings.

What Homeowners Are Allowed To Do In Texas With Refinancing Their Homes

Texas borrowers are now able to complete re-financing as rate and term transactions even after obtaining a Texas home equity loan. Now called Texas (a)(4). This is a huge advantage for folks trying to obtain a lower interest rate because cash-out loans typically do have a higher interest rate than a rate and term refinance. With this new rule, many borrowers can take advantage of obtaining lower interest rates. The demand for cash-out refinancing seems to be raising with the increasing property values throughout the state of Texas.

You can use the money you save to pay off debt, make home improvements, or save for a rainy day. Whatever you use it for, a cash-out refinance can be a great way to get a lower interest rate on your home loan.

What Makes Cash-Out Refinance Mortgage In Texas Different

Texas established the (a)(6) laws, mainly the 20% equity requirement to prevent borrowers from equity stripping their property. They have also created a minimal timeframe requirement before you refinance your home again. That timeframe is 12 months, meaning once you obtain a Texas cash-out refinance, you may not enter another cash-out refinance for at least 12 months from your first payment. This is also true about competing a rate and term refinance

Special Texas Cash-Out Refinance Mortgage

A bulk of the confusion for Texas cash-out refinancing comes from loan products are available.  A Texas (a)(6) loan will be a conventional loan, 100% of the time. Due to the laws, you may not enter an FHA or VA cash-out refinance in the state of Texas. The reason behind this can be unclear. Those loan programs allow you to take out more than 80% of the value of your home, or loan to value (LTV).

FHA And VA Loans Cash-Out Refinance Restrictions For Texas Homeowners

Both HUD and the Veterans Administration allow cash-out refinances on FHA and VA loans. An FHA cash-out refinance allows you to refinance up to 85% of the value of your home, and VA loans even higher. 100% LTV! It seems logical that you would be able to use these long products and only go up to 80% loan to value. Unfortunately, in the state of Texas, cash-out refinance mortgages are not allowed on FHA and VA loans. Although it is not allowed at this time, it may change and potentially allow it at a later date. This does not help borrowers who have entered into bankruptcy or have had housing issues in the past.

Types Of Refinances in Texas State

Now that we’ve got that out of the way, let’s take a look at the different types of cash-out refinances available in Texas.

Home Equity Loan

The first type of cash-out refinance is the home equity loan. As the name implies, this type of loan allows you to tap into the equity you’ve built up in your home. Home equity loans are typically second mortgages, meaning they’re subordinate to your primary mortgage. That said, home equity loans often come with lower interest rates than traditional mortgages, making them a good option if you’re looking to consolidate debt or make some home improvements.

HELOC

The second type of cash-out refinance is HELOC. You may use a HELOC, also known as a home equity line of credit (HELOC). A HELOC works similarly to a home equity loan in that it allows you to access the equity you’ve created in your house.. However, unlike a home equity loan, a HELOC is a revolving line of credit, meaning you can borrow against it as needed up to a certain limit. HELOCs also typically have lower interest rates than traditional mortgages, making them another good option for debt consolidation or home improvements.

Cash-Out Refinance

Finally, the third type of cash-out refinance available in Texas is cash-out refinance. This type of refinancing allows you to replace your existing mortgage with a new one and receive cash back at closing. Cash-out refinances are typically first mortgages, meaning they’re senior to any other loans you have on your home. That said, cash-out refinances often come with higher interest rates than traditional refinancings, so it’s important to weigh your options before deciding if this is the right move for you.

No matter which type of cash-out refinance you’re considering, it’s important to remember that there are some risks involved. For one, cash-out refinances typically require higher interest rates than traditional refinancings, so you’ll want to make sure you Shop around and compare rates before deciding on a lender. Additionally, because you’re borrowing against the equity in your home, you could end up owing more than your home is worth if the value of your home decreases.

How to Qualify For A Cash-Out Refinance in Texas

There are thousands of borrowers in the state of Texas in cities like Austin and Houston to feel left in the dark because they don’t qualify under conventional guidelines, there is hope. Texas Cash-Out Refinance Mortgage:

• At Capital Lending Network, Inc. we do have a full line of NON-QM loans available.
• These are designed for borrowers who do not fall into the conventional realm.
• These loans are available without seasoning requirements for housing events such as a foreclosure, short sale, deed in lieu, or even late payments on a mortgage.
• There are also shorter waiting periods after Chapter 7 and Chapter 13 bankruptcy.
• These loans still follow the Texas (a)(6) timeframe requirements and will not allow you to cash out above 80% of the value of your home.
• There are many products available for self-employed borrowers looking to take cash out of their property.

The beautiful thing about these loan programs is, you are always allowed to refinance out of them once you have met your seasoning requirements and meet the eligibility to enter into conventional financing.

If you’re considering a cash-out refinance in Texas, there are a few things you should know. First, while you can technically refinance your home at any time, it’s best to wait until you’ve built up some equity. Second, there are different types of cash-out refinances, each with its own set of rules and guidelines.