You can use equity from your current home to purchase a second home through cash-out refinancing. This is a viable option for homeowners who need a down payment to buy a second property. However, if your equity is large enough to cater to the entire cost of the second property, the better. Arizona mortgage refinance works well if you’ve got meaningful equity.
a. Credit Score
The minimum credit score for qualifying for a cash-out refinance is 620. However, some programs, including the FHA loan program, accept as low as credit scores equivalent to 580.
b. Home Equity
The basic criteria for eligibility of Arizona mortgage refinance is to have at least 20% home equity.
c. Loan to Value Ratio
You should have a loan to value ratio that doesn’t exceed 80%. A lender won’t approve your loan without determining the LTV.
d. Debt to Income Ratio
Most Arizona mortgage lenders need a debt to income ratio below 50%.
e. Proof of Income or Employment
In conclusion, a cash-out refinance will help you acquire a second home with ease. You can also consider its alternatives, including HELOCs and bridge loans.