Can You Get a (HELOC) Home Equity Line of Credit Through the FHA?

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The FHA helps families purchase desired homes.
The FHA helps families purchase desired homes. (Image: Jupiterimages/Comstock/Getty Images)

A Home Equity Line of Credit (HELOC) from a conventional lender is a loan that allows the homeowner to borrow a set amount of money based on the equity of the property and that is secured by the home. A HELOC differs from a conventional bank loan or mortgage in several ways. The full amount of the loan is not received upfront; rather the homeowner spends up to a set amount as the need arises. HELOC can be obtained through the Federal Housing Authority.

FHA HELOCs

The Federal Housing Administration was created in 1934 and became part of the Department of Housing and Urban Development in 1965. An FHA HELOC is a mortgage that is insured by the FHA. The FHA does not provide the funds of the loan, only insures it. A FHA mortgage loan is easier to obtain and has lower interest rates than do conventional bank loans. In addition, FHA mortgages require much lower down payments, often as low as 3 percent of the purchase price. The FHA is thus able to help low and middle income families with the purchase of a home.

Different Interest Rates

The interest on a HELOC is based on the prime rate and is therefore variable. Some banks do offer fixed rates on a HELOC, however. The monthly payback amounts changes according to the interest rate and the full repayment is due at the end of the “draw period” either as a lump sum or according to a prearranged amortization schedule.

What is an FHA HELOC?

The FHA offers its own HELOC. Like a conventional bank HELOC, the FHA HELOC works in a similar manner to a credit card. When one applies for a credit card, the bank sets the maximum amount available for use by the credit card holder. No interest is paid until an amount is used. The monthly payback amounts are based on the sum used and the interest on that amount. With an FHA HELOC, the amount borrowed is always available for use and is paid back on a monthly basis including the interest on the amount used.

Apply for a HELOC Online

FHA HELOCs are not difficult to obtain and can be applied for online with a simple application form.

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