FHA now requires 2 appraisals on some “Cash Out” Loans.

In the last year, the FHA loan became the leading loan in “Cash Out” refinances for home owner’s. FHA allows borrowers to refinance and take cash out up to 95% LTV (Loan to Value of the Home). Conventional loans from Fannie Mae and Freddie Mac have been limited to 80% in Arizona because Private Mortgage Insurance Companies had tightened there guidelines. Now FHA requires 2 appraisals for any cash out loan over 85% LTV. The 1st appraisal will require the appraiser to actually come into the home and inspect it( Full Appraisal). The 2nd appraisal can be a “Drive By” appraisal. This is done by the appraiser going to the property and taking pictures from the out side of the property. Homeowners are not required to be home when this is done. The 2nd appraisal will be ordered after the 1st appraisal is completed. The 2nd appraisal is done to support the value of the 1st appraisal. Closing time may be slightly affected by the need for an 2nd appraisal.


You loan officer should do more upfront research to prevent any problems with the 2nd appraisal supporting the value. Homeowners should tell the loan officer everything about the home. Loan officers should know of any improvements made to the home and all amenities the home has. One item FHA looks at is lead based paints. If the home was built prior to 1978, lead based paint may have been used. FHA requires that all painted areas be free from chips. If any painted areas are chipping you will be required to repaint those areas. There can also not be any paint chips in the ground around the property.


Requiring 2 appraisals for a FHA Cash Our Loan may increase the costs of the home loan. The 2nd appraisal will cost between $250-$300. Homeowners should not let this cost prevent them from taking advantage of the only loan product that allows homeowners from using up to 95% of their homes equity. With the current economic situation homeowners in Arizona are in I am paying for the 2nd appraisal for the homeowners at the closing of their loan*. FHA Cash Out Rates are in the low 5%. Arizona Homeowners should take advantage of this loan when ever they need to consolidate debt, take cash out for home improvements, cash for a vacation, money for school, or anything else.