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can you have 1st mort and 2nd lien on home and still qualify for a FHA loan?

My home is worth 220k, i have a first mortgage of 196k and a 18k equity line of credit on the home.... can i qualify to refinance via FHA loan?  My current rate is 8.88% variable and i want to take advantage of the really low rates so i can pay less monthly..
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July 08 2010 - Beaverton
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saybyc, assuming you can credit/income qualify for an FHA loan, it is possible to refinance the 1st mortgage. The Line of Credit lender will have to agree to resubordinate to restructuring your 1st mortgage and your combined loan to value will end up being 100%, the max FHA will allow. You will only have room to roll a couple thousand into the new 1st mortgage so if you dont have the cash to bring to closing for the overage in closing costs and prepaids you can raise the rate to cover the fees. The combined loan to value is calculated on the credit limit of the LOC, not the balance so if your limit is $25,000 then you must have the LOC lender cap the limit at $18K or the cltv will be too high to qualify. As long as the LOC lender is willing to resubordinate, your appraisal comes in at $220K or higher, and you credit/income qualify then you can save aprx $375/month. If the appraisal comes in higher than $220K, then you can lower the rate and roll more closing costs into the loan amount.   
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July 09 2010
You would benefit significantly by refinancing.  If you are maxed out on your equity line of credit, you don't have enough equity to refinance.  Do you have access to money to pay off the $18K?  If not savings, perhaps take a loan against a 401k if available. 
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July 09 2010
If you used the second mortgage to purchase the home then it would be considered a rate and term refinance and FHA would allow a higher LTV. Even with the higher LTV It appears there may not be enough equity. Where are you getting that value estimate? 

Given the info you have provided on your current first mortgage it doesn't seem like it would be owned by Fannie Mae or Freddie Mac. If it is owned by either of them you may have other options. 

I would advise you to have someone look over the details of your scenario to see what options are available to you. They would need some basic info from you before they could give you a solid recommendation. 
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July 08 2010
It would be treated as cashout refinance since you have a 2nd that would be paid off and consolidated into the new first loan. FHA can go up to 85% LTV and it appears that you already exceed that just with the loan balance on the first.
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July 08 2010

Yes and no. Is the $18,000 your balance or credit limit? If credit limit, what is the balance?

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July 08 2010
 
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