Home Equity Loan/HELOC

Doodlebug22 · ‎12-02-2022

Long time forum user, first time poster! I'm considering a home equity loan or HELOC to pay down debt and make some home improvements. Home is valued around 630k, we owe 295k. Looking to pull about 100k equity. Primary purpose is to pay down 60k in various debt and use 40k for improvements in the next two years. I'm unsure which makes more sense for us. I think the home equity loan since we will be using over half the loan right away, but could use community advice on choosing the right product.

Combined income is 240k. FICO scores 720-750. My score from DCU Is 720. All debt except current mortgage and car loan will be paid with this loan. Current mortgage and property tax payment is $2390, car loan is $600. I want to be as prepared as I can be so have some questions.
- What documents do lenders need for application? I've read they request W-2, pay stubs, mortgage statement and property tax statement.

- I assume they will want to know what debt we will pay off.
- Generally, are debts to be paid with the loan included in DTI?
- I have been a DCU member since 2015, having financed a car through them. I have savings account and Visa with them as well. Does anyone have home equity loan/HELPC experience with them to share?

- I'm considering local credit unions for this process. Any recommendations for local CU in Atlanta?

Thank you in advance for any advice.

Revelate · ‎12-03-2022

So an equity loan is basically a second mortgage and it's a full Monty underwrite. HELOCs aren't nearly as onerous and are a lot more forgiving anecdotally.

The other big thing is an equity loan is a fixed rate product, a HELOC is variable. I don't think we are going to be in this interest rate forever, if I were carrying this debt longer term I'd want a variable rate personally other than it will cost me somewhat more in the short term.

DCU in my opinion has one of the absolute best HELOC products on the market, it was brilliant for me though I mostly used it as my financial reserve I can't rate it highly enough. Sometime in the next few months I'm going to have a 6% or higher mortgage and at that point I'm just going to be aggressively paying it down. At some point I will open a DCU HELOC on it just to get the money back out if needed.

You could go either way, but DCU even has a fixed rate advance feature on their HELOC (for an extra 0.25% IIRC) that you could leverage if you had a shorter like 3 year timeline. Very very flexible and you'd qualify for their best rate unless they changed their underwriting which I think is still LIBOR - 0.25% which is basically as good as it gets rate wise on a HELOC.

Doodlebug22 · ‎12-04-2022

Thanks, @Revelate. What docs did DCU require for your HELOC? I'm just starting my journey so am looking for as much info as possible. The ability to change to fixed rate with DCU is compelling. Probably calling DCU this week for more info. Thanks!

Revelate · ‎12-04-2022

@Doodlebug22 wrote:
Thanks, @Revelate. What docs did DCU require for your HELOC? I'm just starting my journey so am looking for as much info as possible. The ability to change to fixed rate with DCU is compelling. Probably calling DCU this week for more info. Thanks!

Little if I remember correctly @Doodlebug22 , it was so small I didn't even record the documents explicitly submitted unlike what I did for all my mortgage applications. It was outsourced to a partner, so this may have changed. The big thing was around the appraisal, employment and income plus the obligatory credit check (which was EQ only) and a rough DTI calc around that.

They did ask for some things like my condo's master certificate of insurance, I can't find anything else in my email that they requested very straight-forward process. Looks like it took 10 days from initial app to UW approval though this was in 2016 and that probably is irrelevant now.