Refinancing a HML into a FHA loan Question about 2nd Mortgage

Financing, Hard Money Lenders, Private Money
1

Greetings,

I wanted to ask the community this question.

Currently I am approved for an FHA loan, that I will use to refinance my HML Loan. What I want to know is;

Can I place a 2nd mortgage on this home during the rehab period? The home is worth 120K and my HML loan will be 75K.

I was thinking I could maybe place a 2nd mortgage on the home during the rehab and when I do my FHA refi, I can actually pay myself during the FHA refi.

is this possible?

Please weigh in.

Thanks.

2

If you have used a HML, it is safe to assume that this was for the purposes of purchasing an investment property (there aren’t too many HM lenders that will orginate loans for owner occupied properties).

Assuming that this is the case, FHA will not underwrite the refinance because they can be used for owner occupied transactions only.

Furthermore, FHA doesn’t allow for subordinated seconds behind their 1st.

If this is really intended to be your primary residence, why didn’t you just get a 203k?

Regards,

Scott Miller

3

Yes they do, unless they have changed something very recently and I haven’t heard it yet.

FHA only cares about their loan and the LTV of the first. You can go 95% cash out on the first mortgage refi, and have a CLTV of 150% with the second mortgage suboordinating. As long as you can get the second to suboordinate, FHA doesn’t care. I’ve closed ones like this before.

4

Yes they do, unless they have changed something very recently and I haven’t heard it yet.

FHA only cares about their loan and the LTV of the first. You can go 95% cash out on the first mortgage refi, and have a CLTV of 150% with the second mortgage suboordinating. As long as you can get the second to suboordinate, FHA doesn’t care. I’ve closed ones like this before.
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I see, I was under that same impression. As FHA loans have a far higher LTV than conventional loans. Here are the numbers on this home.
What I am seeking is to attach a 2nd mortgage to the home, that will be paid off when I refi out of my HML.

This is just to gain a bit of leverage for myself.
Thanks for the reply.

5

Ron,

I believe that the scenario you are describing is available on the FHA secure program. However you will still have to qualify for the FHA loan with the second lien debt included in your ratios. So even if the second lien will subordinate to the first that extra debt may disqualify you for the loan. I would be very careful about taking out second liens on this property hope to cash out during the refi. Especially if you are in Texas.