Can I get a home equity loan with a first mortgage?
I am buying my first home with an FHA loan. The mortgage company I am using doesn't do a 203K loan and I would like to use money to improve the house. I was approved for $40,000 more than purchase price and only want $20K max. My credit is not perfect... I'm trying to find out the chances of being able to get a home equity loan with a first mortgage. The house is valued $277K and the loan will be for $229000. Any help would be great!
- 1 decade agoBest Answer
A $229,000 mortgage on a $277,000 property is an 82% loan-to-value (LTV) ratio. So, you have some wiggle room in obtaining a second (these usually max out at 90% LTV).
My first question would be where is the other $48,000 coming from for the purchase? If it's cash, then you will have no problem getting a home equity loan for about $20,000 with your remaining equity (up to the 90% LTV). If you came up with the $48,000 with a second mortgage, you're already at 100% LTV and, particularly with blemished credit, I doubt you'll be able to get the additional funds.
The fact that you were approved for $40K over the purchase price means nothing. A bank is only going to lend up to the value of the house and, in today's mortgage industry situation, I would be surprised if anyone were willing to go over 90% LTV.
- Beverly SLv 71 decade ago
The problem you will have is that for the 1st year you own the house lenders go by the lower of the appraised value, or the sales price. So if you are paying say $230,000.00 for the house, that is what the 2nd mortgage heloc will base your value on until you have house 12 months. Then you can go by appraised value. By having to base it on your sales price you would not have equity by lender standards for a year. Find a lender who does 203K loans. If they are FHA approved they should be able to.Source(s): 22 years mortgage experience.
- 1 decade ago
Chances are, you will have to wait about a year to tap into your equity. I would try finding a lender that does 203k loans. If you are able to find a lender to do a home equity loan, it will be after the closing on the home & the interest rate would be quite high.