Best Lenders for FHA Loans
June 27, 2019 / Chuck McPherson
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If you’re a home owner and find yourself in need of a large amount of cash to fund a major expense such as a renovation, medical expenses, or your kids’ college tuition, one type of loan you should consider is a home equity loan
Top 2 Lenders for Home Equity Loans
#1
View Rates
Years of operation: 22
States: 50
Annual Closed Mortgage Volume: NA
Pros
  • Free service
  • Compare multiple FHA lenders
  • Handy educational resources
Cons
  • Not a direct lender
  • Rates shown only by entering contact details
  • Calls from multiple lenders
LendingTree is an online marketplace connecting users to the lowest rates for FHA loans in seconds. This free online platform includes handy tools like the FHA loan calculator. Simply enter your home price, loan amount, credit score, and zip code to discover what rates LendingTree’s network of lenders can offer you and to see a detailed breakdown of all the costs.
#2
View Rates
Years of operation: 33
States: 50
Annual Closed Mortgage Volume: $90 billion +
Pros
  • Quick application process
  • Nation’s largest FHA lender
  • Handy educational resources
Cons
  • No FHA rates on website
  • Live chat only available in business hours
  • Rates aren’t always lowest
Quicken Loans is the largest provider of FHA loans. It prides itself on its streamlined application process, assigning applicants to a dedicated FHA loan agent and asking for the minimum documentation required under the Federal Housing Administration’s guidelines.
Closing costs for HELs usually reach around 2-5% of the loan amount. As with first mortgages, lenders are open to negotiating the closing costs, so always make sure to speak to a few of the best lenders before applying for a home equity loan.
What is a Home Equity Loan?
A home equity loan, or HEL, is a type of secured loan in which the borrower puts their home up as collateral. It is also known as a “second mortgage”, because it works in reverse to a traditional mortgage. In a traditional mortgage, the borrower pays the lender and the borrower’s home equity increases. With a HEL, or second mortgage, the lender pays the borrower a lump sum, and the borrower’s home equity decreases.
Another type of home equity loan worth considering is the home equity line of credit, or HELOC. Whereas a HEL is a fixed-rate loan paid in one lump sum, a HELOC is an adjustable-rate loan and is paid to the borrower up to an approved credit limit and on a per-needs basis.
Who is Eligible for a Home Equity Loan?
Home equity loans are available to anyone who owns a significant portion of the equity in their home, set by most lenders at a minimum of at least 80-90% of equity. It can be applied to any major expense, including a home renovation or repair, medical expense, paying off credit card debt or other debts, or funding a child’s college tuition.
The process of applying for a HEL is roughly similar to that of applying for a first mortgage. Your lender will mostly likely inform you of the following requirements and limitation:
  • Your credit will be checked, although your score may have a lesser impact on your lender’s decision than it would for a regular mortgage or an unsecured loan.
  • You will need to have your home appraised, and your loan-to-value ratio (the ratio of equity or ownership you have in your home) will be closely examined when the lender makes its decision.
  • Depending on the lender’s examination and the loan amount you requested: some lenders may be willing to offer you a loan worth up to 125% of your home’s value, i.e. 1.25 times the value of your home.
Benefits of Home Equity Loans
HELs and other secured loans take a lot of the risk away from the lender and place it on the borrower. In return for assuming the risk, lenders are willing to offer borrowers better loans with a number of significant benefits. Here are just a few of the benefits HELs offer to borrowers:
  • TLenders are willing to overlook a less-than-perfect credit rating.
  • Rates are typically lower than for personal loans and other types of unsecured loans.
  • The payment periods are generally longer, giving you plenty of time to pay off the debt.
  • According to the IRS, if the home equity loan is used to buy, build or substantially improve the taxpayer’s home that secures the loan, interest paid to the lender is tax-deductible.
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