How to Calculate your FHA Home Equity

There are many things to keep in mind when calculating your FHA Home Equity.  FHA home equity loans are insured by the Federal Housing Commission but made by private lenders using  equity built up on the home. FHA home equity loans are a good option for low and middle income families. The interest rate on these loan are much lower than for unsecured debt, such as that in credit cards. The interest rate can be fixed and applied for the short term. Also, such families are more likely to actually get a loan as it is secured. 

Assessing Whether You Qualify For a Loan

Several factors will help you qualify for an Home Equity Loan using the equity built up on your house. A steady we employment history with the same employer over two or more years looks good on your application. A relatively high income will also help you get a loan, with your mortgage payment being less that 30% of gross income.  A high credit  score will also help your case greatly. As with normal home equity loans, It is also important to have a high loan to value on your home.

FHA Refinance Loans

An FHA refinance loan is similar to a home equity loan but you often do not need an appraisal, credit underwriting, qualifying debt ratios, credit check, income verification, or face to face application. It is especially beneficial to homeowners whose houses have increased in value since their purchase. This option allows the borrower to take out another mortgage for more than the remaining cash on their current mortgage, repaying the current mortgage using this new loan, and having enough left over for use on other items. This allows access to the equity that homeowners have built up. It is best to wait until a least a year, and preferably several more years have passed since the initial purchase so that equity can be built up. In order to qualify for this kind of loan your original house loan should be an FHA loan, and should be in good standing.

Home Equity Conversion Mortgages

Home Equity Conversion Mortgages are getting more and more popular among older Americans who use the program to supplement social security or to help pay for medical expenses.  This is the FHA’s reverse mortgage program. It allows you to withdraw some of your house’s equity. Unlike a traditional home equity loan however, you don’t not need to repay the loan unless you no longer use it as your residence. To qualify for a home equity conversion mortgage you must be older than 62, and own your home or have a low balance that can be paid off with the reverse loan. The borrowing limit on this kind of loan is determined by you age, the interest rate, and the appraised value of your house or the FHA’s mortgage limit in your area. You can not be foreclosed from a home equity conversion mortgage.

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