While homeowners typically equate the FHA loan program with low-down payment mortgages, FHA refinances are also available.

In addition to easy-to-source rate-and-term and streamline refinances that replace an existing FHA mortgage with a better one, the FHA even offers cash-out refinance loans.

A cash-out FHA loan refinance allows the borrower to take out up to 85 percent of the value of his property. In today’s market, the ability to pull out 85 percent of a home’s equity is attractive, but not as generous as a 96.5 percent FHA purchase mortgage.

Nevertheless, while the borrower doesn’t get the high leverage of a regular FHA mortgage, he still gets many of its other benefits.

FHA Refinance Requirements

FHA cash-out refinances don’t impose limitations on how borrowers use the cash they take out. In addition, they also don’t require the applicant to have stellar credit.

It’s possible that someone could qualify with a credit score in the 500s. What they don’t need is an existing FHA mortgage — FHA cash-out loans are available even when a borrower is coming from a conventional mortgage.

100% And Beyond

It is also possible to borrow more than 100 percent of your home’s value through the FHA 203(k) program. 203(k) loans have one catch, though. Borrowers have to spend the money on their home.

203(k) loans are sometimes referred to as rehabilitation loans. Based on the assumption that the repairs or renovations performed with the money will raise the home’s value, the FHA lets borrowers take out extra money to pay for them.

Applying for a 203(k) loan isn’t always easy, but it can provide extra money for repairs. If a borrower thinks of an FHA loan as only being a tool to buy a house, he is missing out on some of the FHA program’s biggest benefits.

For many people, it is also the best cash-out refinance program available, whether in its traditional or in its 203(k) guise.