Home owners look to fha loans to access home equity
July 3, 2008
The real estate industry is turning back the clock on home financing. With lenders tightening underwriting guide lines and some banks freezing home equity loans that are already in place, many home owners have limited options if they are exploring a home refinance. The market very closely resembles financing of the early 1990’s when lenders paid close attention to a borrowers debt to income ratios and equity positions.
Many home owners are finding that FHA loans, loans backed by the Federal Housing Authority, a division of HUD are the best loans to refinance into if they are trying to take cash out of their home for home improvement or debt consolidtation. FHA loans offer two major advantages over conventional financing in todays market. Advantage number one is that an FHA loan allows a home owner to access up to 95% of the homes appraised value. The second advantage is that FHA loans are insured by HUD and not the private marketplace where PMI insurance companies have eliminated coverage in many geographic areas due to the home value depreciation.
FHA loans are not sold through the FHA, they are offered exclusively by banks or lenders that have the authority to offer FHA mortgages. The FHA simply provides underwriting guidelines to follow and insures the mortgage for the servicing bank in the event a home owner were to default. FHA mortgages have fixed rate options for fifteen and thirty year terms and are priced very competively with conventional home loans.
