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Texas a6 cash out refinance: Find out how to qualify for it

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 14th Mar, 2007 11:37pm
In the state of Texas, there is a law pertaining to cash-out refinance. This law is known as Texas cash out 50(a)(6). This is more popularly known as Texas a6 law. Under Texas refinance laws, you are required to take out a cash out loan of 80% of the appraised value of the property.


If you are a US citizen, a permanent resident alien or a non-permanent resident alien, then you may be eligible for this loan. However, if you are a foreign national or a borrower with diplomatic immunity, then you will not be eligible for this loan.


Eligibility criteria for Texas a6 cash out refinance


Eligibility criteria to get approved for Texas a6 cash out refinance are listed below.

Properties


Single family residences, warrantable attached/detached condos and PUDs classified as homestead under Texas a6 laws. Non-warrantable condos, non-warrantable Planned Unit Developments (PUDs), manufactured home etc. are however not eligible. Anyways, the minimum property area should be 600 sq ft. Property must be classified as a homestead under Texas refinance laws.

Credit score and DTI


The minimum credit score required for this is 620. In addition to this, the maximum permissible DTI (debt to income) ratio is 45%.

Credit history


You should have established a good credit score after you have filed bankruptcy and/or foreclosure. If your property has been foreclosed, then the waiting period to get approved for this loan is 7 years.

Employment


A continuous employment of 2 years is required. For self-employed persons, proper documentation of income is required.

Assets


Assets that are used to close the transaction must be disclosed. Funds that you use in the transaction must come from a verified source.
While taking out this loan, you should follow the Texas a6 cash out refinance rules properly. It is advised that you should get the help from a mortgage attorney for this.
Posted on: 14th Mar, 2007 11:37 pm
hi, has anyone here heard of texas a6 cash out refinance rules or something like that? i am looking to refi my property in texas. any info will be helpful.
Welcome Jacey,

In Texas, there is a law related to cash-out refinance. This law is known as the a6 law which allows a lender or a mortgage company to offer cash-out loan for a maximum of 80% of the property-value.
Posted on: 14th Mar, 2007 11:50 pm
jacey,

i've been doing loans in texas for over 10 years which puts me just prior to the legislation changes. the state constitution details what can and cannot be done with our primary residence or "homestead". in the homestead act, article a, section 6 (thus the a...6) is where the changes were made back in 1996/97 that enabled texans to do a cash-out loan.

there are many unique requirements, some of which make very little sense to people. these requirements only apply if you are:

1) financing on your primary residence.
2) you are refinancing an existing note additional money for debt consolidation or simply cash to you
3) or you are taking out a new loan for debt consolidation or cash out to you
4) the refinancing of a loan which was created as a texas a6 home equity loan. once a home equity loan....always a home equity loan.

a texas a6 home equity loan is not one of the following:

1) a refi loan to change the interest rate or terms of an existing loan that was used to purchase the home
2) refinancing to combine a 1st lien and 2nd lien that were used to purchase the home
3) refinancing plus cashing out to pay an ex-spouse's portion of the equity
4) refinance plus cash out where the cash out is to only pay back state, local or federal taxes
5) a refi plus cash out where the cash out is done as a bona fide home improvement loan where funds go directly to the contractor.

unique features of the texas a6 home equity loan are:

1) borrower must be given a notice of their rights and the loan cannot close earlier than 12 calendar days from when this notice is received.
2) a home cannot have more than one texas a6 loan on it at a time
3) a texas a6 loan cannot be refinanced within the first 12 months
4) a texas a6 loan cannot be done if the total mortgage financing will be greater than 80% of the home's value.

there are more little nuances but this should get you started. if you have more questions, post them here and we'll get the answers for you.
Posted on: 17th Mar, 2007 01:10 am
Ok Ken,

So you mean to say that a Texas a6 loan is a home equity loan. It can be taken out to do a cash-out refinancing on an existing note or when one intends to consolidate debt.

I am not so clear about the third requirement. Is it that one can apply for texas a6 mortgage when he wants a completely new loan to consolidate other debts? Or do a cash-out for improvements or pay off other bills? Pls explain

Thanks in advance
Posted on: 17th Mar, 2007 02:16 am
Anytime you are pulling cash out of your home, regardless of lien position, it falls into a Texas A6 loan category. So if you have an existing 1st lien you refi Plus cash, that is a Texas A6 governed transaction. If you have a 1st lien and you don't refi but instead take out a 2nd lien home equity loan or HELOC that ALSO falls under Texas A6 governance.

I hope that helps...
Posted on: 29th Mar, 2007 11:43 am
yeah definitely it helped :)
Posted on: 30th Mar, 2007 12:03 am
Yes, unfortunately - the State "labels" Texans, when they do a Texas A6 OR what is called a "cash-out" against THEIR PRIMARY RESIDENCE.

(if you have investment or a second home = does not apply.)

you can ONLY do a Texas cash-out every 1 year + 1 day from the date that the last A6 funded.

so if you wanted to refi at a lower % rate 8 months later - you (sorry) still have to wait for 12 mos + 1 day to fund your next loan.

call me for help.

Jeff
512-263-3132
Posted on: 15th Jun, 2007 03:45 pm
Hi Jeff,

Welcome to our community.

Thanks for sharing your knowledge with the community.

We hope that you'll have lots of fun interacting with people here.

With best wishes :)

Brian.
Posted on: 18th Jun, 2007 05:25 am
Just what I wanted to know about this refi options in Texas especially the Texas a6 cash out refinance law - thanks for the concise information!
Posted on: 15th Aug, 2007 11:33 am
Feel free to ask any other thing you would like to know about Texas mortgage refinance and the A6 law Jentimus. We will try to help you out in every possible way.
Posted on: 15th Aug, 2007 12:03 pm
Hi Jentimus,

It's really nice if you've have been benefitted from the community. Do not hesitate to ask any further question.
Posted on: 15th Aug, 2007 09:34 pm
I am builing a new home, but have not yet sold my old home. I entered into my current mortgage about 5 years ago, and it was a Texas cash out mortgage. It is likely that I may need to close on my new home before I sell my old home. Am I eligible for a home equity line of credit in Texas on my old home (to get some cash out for closing on the new home), or do I have to refi my current mortgage? Thanks.
Posted on: 14th Nov, 2007 02:48 pm
Hello Tim,

Your query has already been answered at http://www.mortgagefit.com/texas/cashoutrefinance-heloc.html

Have a look at it.
Posted on: 15th Nov, 2007 03:42 am
I truly don't understand why Texas legislators would make a law that says I cannot refi my own property as often as I want, so long as I can afford it and am not in debt or default on anything. They did nothing to keep out low-interest, ARMs a few years ago, and now are talking about bailing them out. Yet they will not let me refi my loan, at the currently available rate that cut my payments by $150/mo AND let me pay it off 10 years earlier, just because I refi'd my ARM (which I could afford) into a Fixed 8 months ago. Is there a loop-hole or way to get around this obviously stupid law that doesn't benefit the homeowner in any way? My bank is willing, it would be with the same bank, on the same property, just a better rate.
Posted on: 07th Apr, 2008 11:19 am
Welcome Ann,

You cannot go for a Texas mortgage refinace within one year since you have taken the mortgage. After one year you can be able to go for refinancing. Actually in ARM also your rate is not adjusted before one year.

So one should shop around and think twice before taking a mortgage whether they can afford it or not so that they need not to refi within a year.

Let me know if you have any more queries.
Posted on: 08th Apr, 2008 02:58 am
Is there a government cite I can show my complaince manager about this cash out law? She is in Boston. I am in CA. Client is in Dallas and wants to cash out on her home to less than 75% ltv. I just need a public government resource I can show her.
Posted on: 28th Apr, 2008 09:12 pm
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