How do Home Equity Loans work?

[StartingOver10]

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@CreditJim wrote:

I am still progressing with this process.

I have applied for a 'Home Renovation Loan' with the credit union I've been a member of for years. It allows for up to 100% of home's value, at a slightly higher interest rate. The rate they're quoting at the moment is 5.25% for 15 years.

They asked for Tax Transcripts for 2014 and 2015, which is fine.

How thorough are credit unions with these kinds of loans, by which I mean is the process as detailed and scrutinized as heavily as the mortgage process?

Are they likely to ask for 2016 tax return too? We haven't filed this yet and it'll show a larger income than the 2014 and 2015 returns.

I have asked for $60k. I'm just wondering what I need to prepare for as I have not been through this before, only 2 conventional mortgages. I signed all the disclosures and the credit union said the application is with the underwriter. Hopefully it all progresses and I can get the appraisal done quickly. They fund the loan themselves in house.

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^^^This sounds like an excellent loan program. Did you ask the CU what value they are using?  Current market value, your original purchase price or the projected value of your home after you renovate?  Each one of those are market values - but would be widely different from one another. 

Please keep us posted. If you close soon (Feb, Mar), I bet they don't ask for 2016 tax returns at all.  I have found cu's to be very good with equity lines. Also, generally very fast with HELOCs- with a few exceptions. I don't know if the renovation loan will be similar.

[CreditJim]

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@StartingOver10 wrote:

^^^This sounds like an excellent loan program. Did you ask the CU what value they are using?  Current market value, your original purchase price or the projected value of your home after you renovate?  Each one of those are market values - but would be widely different from one another. 

Please keep us posted. If you close soon (Feb, Mar), I bet they don't ask for 2016 tax returns at all.  I have found cu's to be very good with equity lines. Also, generally very fast with HELOCs- with a few exceptions. I don't know if the renovation loan will be similar.

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Their website didn't have much information and the loan officer wasn't very forward with information either. She asked for approximate current value, which I got from my realtor. They will need an appraisal though and that was included in the closing costs. But when I was asking questions, she said they could take into account the projected value too. I have no problem letting them see 2016 - it's just that they haven't been filed yet and it'll add a lot more time if they want that done first.

[StartingOver10]

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@CreditJim wrote:

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@StartingOver10 wrote:

^^^This sounds like an excellent loan program. Did you ask the CU what value they are using?  Current market value, your original purchase price or the projected value of your home after you renovate?  Each one of those are market values - but would be widely different from one another. 

Please keep us posted. If you close soon (Feb, Mar), I bet they don't ask for 2016 tax returns at all.  I have found cu's to be very good with equity lines. Also, generally very fast with HELOCs- with a few exceptions. I don't know if the renovation loan will be similar.

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Their website didn't have much information and the loan officer wasn't very forward with information either. She asked for approximate current value, which I got from my realtor. They will need an appraisal though and that was included in the closing costs. But when I was asking questions, she said they could take into account the projected value too. I have no problem letting them see 2016 - it's just that they haven't been filed yet and it'll add a lot more time if they want that done first.

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What I generally see with a renovation loan is two appraisals:  

• Current market value before renovations
• Market value after renovations

[CreditJim]

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@StartingOver10 wrote:

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@CreditJim wrote:

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@StartingOver10 wrote:

^^^This sounds like an excellent loan program. Did you ask the CU what value they are using?  Current market value, your original purchase price or the projected value of your home after you renovate?  Each one of those are market values - but would be widely different from one another. 

Please keep us posted. If you close soon (Feb, Mar), I bet they don't ask for 2016 tax returns at all.  I have found cu's to be very good with equity lines. Also, generally very fast with HELOCs- with a few exceptions. I don't know if the renovation loan will be similar.

---

Their website didn't have much information and the loan officer wasn't very forward with information either. She asked for approximate current value, which I got from my realtor. They will need an appraisal though and that was included in the closing costs. But when I was asking questions, she said they could take into account the projected value too. I have no problem letting them see 2016 - it's just that they haven't been filed yet and it'll add a lot more time if they want that done first.

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What I generally see with a renovation loan is two appraisals:  

• Current market value before renovations
• Market value after renovations

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Thanks. I will keep my fingers crossed everything works out.