Refinancing debt with an FHA loan to consolidate multiple bills into one new loan has become a popular option for homeowners. FHA, the Federal Housing Administration allows homeowners to borrow up to 95% of their home’s value for a cash out refinance. This cash out can be used to refinance debt the homeowner has including: credit cards, student loans, automobile loans, personal loans, and second mortgages or home equity lines of credit.
This refinancing option is especially beneficial to homeowners whose property has increased in market value since the home was purchased. A cash out refinance allows homeowners to refinance their existing mortgage by getting a new mortgage for more than they currently owe, the difference after paying closing costs and the new escrow account is the cash out. This allows homeowners to access the equity they have built up in their home. FHA does require the homeowner to have owned their current home for at least one year before obtaining a cash out refinance.
Taking consumer debt and converting it into a mortgage can be financially beneficial. Refinancing expensive credit card debt into a tax deductible, low rate mortgage can be a good thing as […]
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“How much can I borrow for a mortgage?” is asked by almost everyone wanting to buy a house or homeowner interested in refinancing. In light of recent changes in the mortgage industry that have eliminated almost every easy-qualifying loan program, this question has taken on even more importance.
The two largest categories of mortgages are Conventional and FHA. Conventional loans have guidelines set by Fannie Mae and Freddie Mac. HUD, the department of Housing and Urban Development, determines FHA’s guidelines. In general, Conventional loans are harder to qualify for because they require larger down payments, higher income and better credit. However, the interest rates are the absolute lowest.
On the other hand, FHA loans are designed to give more flexibility and are easier to qualify for since they require smaller down payments, less income and lower credit. FHA interest rates are typically slightly higher than Conventional rates.
Conventional and FHA both have qualifying ratios calculated from a borrower’s income and debts. There are two ratios, the front or housing ratio and the back or debt ratio. The housing ratio is calculated by taking the proposed monthly payment of the new mortgage and dividing it by […]
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