The Basics

• FHA offers three basic refinance types -- the cash-out refinance having the most limitations and strictest underwriting guidelines. A refinance involves paying off an existing mortgage with proceeds from a new loan. An FHA cash-out allows borrowers to access more than $500 of their home's equity upon settlement of the refinance transaction to be used for cash reserves, investment, purchases or paying off other debts. Cash-out transactions present increased risk to FHA and the lender, compared to other refinance types, because the mortgage balance owed on a property increases.
  
  

Loan Limits

• FHA limits the amount it insures on a mortgage and the single-family mortgage limits are set by county. Maximum loan caps are set on a yearly basis and based upon the Freddie Mac national loan limit. Specific loan limits for underwriting cash-out refinances of properties in Maryland can be found on HUD's website. Mortgage limits remained the same in fiscal years 2009 through 2011. FHA's limits vary among the state's 24 jurisdictions, including 23 counties and Baltimore City. Maximum loan limits range from $271,050 for a one-unit property in a low-cost area, to $729,750 for a one-unit dwelling in a high-cost area. Cash-out mortgages may not exceed these amounts.
  
  

FHA Approval

• The mortgage broker, mortgage company, bank, credit union or savings and loan taking applications and originating FHA cash-out refinances must be approved by HUD to work with the government agency's insurance programs. Lenders must gain approval prior to offering FHA programs and services. As of mid-2011, 333 Maryland lenders have permission to originate FHA cash-out refinances, according to HUD's online database of approved lenders.
  
  Cash-out refinances require an acceptable appraisal inspection report from an FHA-approved appraiser. According to HUD, there were 1,089 active appraisers on the FHA Roster, eligible to perform inspections as of mid-2011. FHA appraisers must be at least certified by the state of Maryland.
  
  

Considerations

• FHA lenders consider borrowers' four Cs of credit to determine eligibility for a cash-out refinance; the four Cs include credit history, capacity to repay, cash assets to close and collateral. Underwriters analyze credit scores, past credit behavior, income, debts, cash reserves and other liquid assets; as well as the condition of the property that will secure the mortgage.
  
  Cash-out refinances involving a property that is part of a condominium project requires condo certification -- that is HUD approval of the project or Homeowner's Association. As of mid-2011, there were 1,089 FHA-approved condominium projects within the state of Maryland, according to HUD.