Do HELOC's have similar underwriting or qualifications?

[Anonymous]

I have never actually done a HELOC.  How are they usually handled?  What is the application and documentation process?  Is it similar to mortgages or similar to credit cards/LOC process?

[Desert-Rat]

Similar to a mortgage.  Must be reconveyed and recorded through a Title company when you close it, and both involve fees.  (What doesn't these days!   )  

It's basically a deed, ie lien, guaranteed by your property and held by the lender.

D-R 

[Lel]

A lot of banks offer HELOCs with no fees to open.  B of A and US Bank do this (or at least they did last year).

[Anonymous]

Does anyone know what the DTI ratio is for Helocs? 

[Lel]

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monkatom wrote:

Does anyone know what the DTI ratio is for Helocs? 

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Do you mean LTV or DTI?

Back in the days of loose lending standards, you could have gotten a HELOC for up to 115% of your home's value.  When I got my HELOC last year, most banks would only do up to 85% LTV.  To refinance my home equity loan, I had to find a lender that would go up to almost 90% LTV.

[Anonymous]

I think the LTV is fine since they owe 100K on a 700K home.  I am a little concerned about the DTI if they use the 28% rule.  They will be fine coming in under the 41% as they have no other monthly debt besides their current mortgage.  This is for my inlaws.

Also since they own some rentals outright and have had tenants for years can they claim the rent as income for DTI purposes.

[Lel]

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monkatom wrote:

I think the LTV is fine since they owe 100K on a 700K home.  I am a little concerned about the DTI if they use the 28% rule.  They will be fine coming in under the 41% as they have no other monthly debt besides their current mortgage.  This is for my inlaws.

Also since they own some rentals outright and have had tenants for years can they claim the rent as income for DTI purposes.

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That 28% front-end DTI rule (and this number varies within a certain range) applies to first mortgages only - principal, interest, property taxes, homeowners insurance, and association fees.  Second liens, like HELOCs and home equity loans, are part of the back-end DTI calculation, so they should be okay - as long as they don't want to take out a $500,000 HELOC.

[Anonymous]

LEL,

Thanks for the info I appreciate it.  They only need 100K so hopefully they should be ok.

Thanks