My husband and I are refinancing our FHA loan of 5%, this is the second refi the last one was in 2010 to get it to 5%. We have our first appraisal that was done when we bought our home of 3000 square ft. with 1 and 1/2 acres which cost us 325,000 and owe 199,000 now, it appraised from outside only at 285,000,but the initial appraiser never came in our house. He came when we were gone. We have 4 bedrooms and 3 bathrooms with many amenities. We are currently going to have a new appraisal done this week with wells fargo and want to do a cash out refinance of 28,000. What would be the best type of loan for us to refinance with? Conventional or stay FHA? Thank-you!
Hi Penny, Unfortunately, without knowing the details of your credit situation it is impossible to know which loan is "better". What you should ask your lender to do is to put all available loans side by side (assuming that you qualify for both)so that you can make an informed decision. Consider how long you plan to own the property, the closing costs you are paying, the benefit of the cash out, the cost of mortgage insurance (both upfront and monthly with FHA), and the interest rate and terms of both loans. It sounds as though you are in a good equity position, and that it may be possible to consider loans aside from FHA - make sure that you consider ALL options before making a decision. Get the advice of several LOCAL lenders, and go from there. (If a lender tells you that they cannot provide you with a quote for a specific loan type, ask them why - understand what they are offering, why, and what you might be able to change about your request so that more options become available).
Hard to answer this without knowing credit scores as there are pretty severe credit based pricing adjustments for conventional cash out loans. In general, the higher your credit scores, the more incentive to go conventional. You cannot borrow more than 80% of the home's value on a conventional cash out.