Gina Farrell

Indepenent Funding Group

S&P Case-Schiller Indices Report Record Rise in Home Prices

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S&P Case-Schiller Indices Report Record Rise in Home PricesHome prices continued to rise at record rates in May according to S&P Case-Shiller Home Price Indices. National home prices rose by 16.60 percent year-over-year in May as compared to 14.80 percent year-over-year price growth in April. The 10-City Home Price Index reported home prices rose 16.40 percent year-over-year and 1.90 percent month-to-month.

20-City Home Price Index Reports 17 Percent Home Price Growth Year-Over-Year

S&P Case-Shiller’s 20-City Home Price Index reported month-to-month home price growth of two percent in May as year-over-year home price gains rose from April’s reading of 15 percent to 17 percent year-over-year home price growth.

All cities participating in the 20-City Home Price Index reported home price gains in May. Three cities held their positions with top rates of home price growth. Phoenix Arizona held first place with year-over-year home price growth of 25.90 percent; San Diego, California reported 24.70 percent home price growth. Seattle Washington held third place with 23.40 percent year-over-year home price growth in May.

Home Price Growth Expected to Slow as Buyers Drop Out of Market

Craig Lazarra, managing director and global head of index investment strategy at S&P down Jones Indices said he found himself “running out of superlatives to describe the record increases in home prices.” Analysts credited homebuyer relocation from urban areas to less populated suburban and rural areas for driving up prices. The pandemic initially drove this trend and continues to do so today. Other factors pushing home prices higher included high demand for homes exceeding homes available. As millennials reach their prime-home buying years, demand for homes will increase. Low mortgage rates also encouraged would-be home buyers into the housing market.

High demand for homes drives home prices up, but slower sales suggest that buyers are reaching a tipping point with affordability. Fewer buyers will raise the inventory of available homes and cause home prices to fall. First-time and moderate-income buyers continue to face affordability constraints in many areas, but home prices likely won’t fall significantly in the near term.

In related news, the Federal Housing Finance Agency reported similar readings for single-family homes owned or financed by Fannie Mae and Freddie Mac. Home prices rose 1.70 percent from April to May and 18.00 percent year-over-year in May. Readings from FHFA include seasonally-adjusted purchase-only data;  refinance transactions were not included.

FHA Cash-Out Refinance – Are You Eligible?

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FHA Cash-Out Refinance – are you Eligible?If you have equity in your home, you may wonder how you can access it. You don’t want to sell your home, but you know you’ve earned a profit from it.

We have many options to secure your home’s equity, one of which is the FHA cash-out refinance. Unlike the FHA streamline refinance, you don’t have to be a current FHA borrower. As long as you meet the requirements below, you can use an FHA loan to cash into your home’s equity.

Qualifying for the FHA Cash-Out Refinance

Like an FHA purchase loan, the FHA cash-out refinance has simple requirements:

  • Minimum 600 credit score
  • Maximum 43% debt-to-income ratio
  • Proof you’ll occupy the property as your primary residence
  • Stable income and employment for 2 years
  • Over 20% home equity
  • Make at least 12 months of timely payments on your current loan

How Much Can You Borrow?

The FHA cash-out refinance allows you to tap into your home’s equity, but you must leave 20% untouched.

Here’s an example: 

Your home is worth $300,000 and your current mortgage is $150,000. With a new FHA cash-out refinance, you can borrow up to $240,000, but first, you must deduct the amount of your outstanding mortgage.

This leaves you with $90,000 in equity.

$300,000 x.8 = $240,000
$240,000 – $150,000 = $90,000

If you can afford the payment without going over the 43% debt-to-income ratio requirement, you could take out $90,000 from your home’s equity, leaving $60,000 untouched.

How to Use an FHA Cash-Out Refinance

The nice thing about the FHA cash-out refinance is you don’t have to justify how you’re using the funds. You earned the equity and it’s your right to withdraw it, but here are a few common uses:

  • Home renovations, repairs, or additions
  • Debt consolidation
  • Pay for college or prepay for a college education
  • Consolidate a first and second mortgage
  • Save as an emergency fund

How to get an FHA Cash-Out Refinance

Securing an FHA cash-out refinance is simple using these steps:

  • Complete an application and get pre-approved by a lender, compare your options and see if you qualify for any other cash-out loan including a conventional cash-out refinance
  • Decide which loan you want, including if you want a fixed-rate or ARM
  • Provide the documentation required including paystubs, W-2s, tax returns, asset statements, and proof of employment
  • Arrange an appraisal time with the appraiser (you’ll need a new appraisal)
  • Work with the loan officer to clear your conditions
  • Close on the loan and receive your cash

Bottom Line

If you’re thinking about tapping into your home’s equity, an FHA cash-out refinance can be a great option, especially if you have less-than-perfect credit. FHA loans have flexible guidelines and allow borrowers to get the money they need to complete their life goals.

You’ve worked hard to earn your home’s equity. If you need it for other purposes, let us help you access it. We’ll discuss your options, go over the costs, and make sure it’s the right option for you!

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