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Can I get a cash out refinance for home improvements if I have less than 20% equity?

My husband and I want to refinance soon.  We bought our home in 2008 for $311,000 and have made several improvements.  Based on similar local sales, I believe it will appraise for around $320,000 now.  We currently owe about $278,000, so we do not have 20% equity.  We would also like to finish the basement, which I am estimating will cost about $20-$25k, or possibly less, because we are willing to do some of the simpler work ourselves (painting, etc.).  What are the options?  Can we do a cash out refinance?  We are already paying PMI, so what are the pros/cons of cashing out on a first mortgage, if we are eligible?  Do any lenders look at the estimated value after improvements for the refinance?  Would we be better off refinancing the first, then getting a second for the improvements, or would we even qualify for a loan like this?  (Our credit scores are in the 750 range, debt ratio is less than 20% with mortgage, and we have 4 and 18 years with current employers.)
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October 24 2012 - Olathe
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Answers (1)

FHA financing would be available to 85% of new appraisal, however the MI rate and duration might prove higher than your existing MI.

The better option might be to seek an equity line or loan from a local community bank or credit union and keep your existing loan as is.
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October 24 2012
 
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