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Can a second mortage be a FHA mortage. We have over $150,000 in debt, but own house free and clear?

Because of our high debt, our credit score is not so good. We are looking to consildate all ddebt into a mortage on our house, built in 1986.
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August 21 2009 - Stevens Point
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Answers (3)

Hi Smiling Girl,

I would be curious to know what your credit score is.  Most Lenders require a 620 score to do an FHA loan.  There are a few however, who will go down as low as a 560 score, but will use "common sense' underwriting  -  your final debt ratio (will there be a reduction etc), your overall credit picture in the last 12 months, a very tangible benefit to you, reserves you have in the bank, job history, income, loan to value etc.  The more of these compensating factors you have, the better your loan looks.  Also, the rate on the loans with a FICO under 620 are about 1% higher than the market rate but they are FHA fixed rate mortgages. 
FHA loans cannot be a second mortgage.  Do you have a Line of Equity or some other lien on your property?  If not, you would be getting a first mortgage anyway, since your property is paid for. 
Good luck with your situation.  I hope everything works out for you.
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August 23 2009
In this case, you would be applying for a first mortgage, which will have better interest rates and easier qualifications.  A second mortgage would only be established if you already have an existing first.  Depending on your credit scores, you should be able to apply for an FHA, cash out refinance.  If both of you are to be on the loan, your fico scores will need to be above 620.  As Tawny stated, the maximum amount you can borrow would be 85% of the property's value.  In your case if you wanted to take care of all $150,000 the house would need to be worth at least $182,000 (this leaves room for closing costs, escrows, etc...).  I hope this helps!   
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August 21 2009
Do you mean a new FHA first mortgage/refinance? FHA allows for cash out refinance loans for non-FHA first mortgages up to 85% of the value of the home. FHA does not offer second mortgages.
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August 21 2009
 
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