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Home equity loan

Sitori
Frequent Contributor

Home equity loan

Hello

sorry if this is in the wrong place...

I just purchased my first home. I know nothing about equity loans but I am going to need something asap since these sellers left me a mess that I wasn't expecting. 

Can someone point me in a direction to get info or where I apply for this, recruitments etc? 

I need about 15-20k. I was originally going to get 0% apr credit cards but so far only approved for one with 8500$ limit. I don't want to have to get two and max them completely and then worry about rushing to pay off before the 15 months.
I was thinking the loan would be a better route. I just don't know much about them or how it works. 

Are there specific banks/ companies I need to choose from? 

Thanks for the help Smiley Happy 


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EQ 701, TU 685, EX ?
Wallet:
Amazon store $2500(10/12), Cap1 $1500 (10/12), Discover $1700 (11/1/12).
Message 1 of 7
6 REPLIES 6
ShanetheMortgageMan
Super Contributor

Re: Home equity loan

You'll need enough equity in your home to qualify for a home equity loan.  Those types of loans will often use the lower of the purchase price or the current appraised value for the first 12 months of ownership and will need at least 5-10% equity after the new equity loan is taken out.  How much do you owe on your mortgage and how much did you purchase the home for?

Helping people with mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 2 of 7
Sitori
Frequent Contributor

Re: Home equity loan

300,000 loan with 290,000$ down. Appraised for 640,000, purchased at 620,000. 


@ShanetheMortgageMan wrote:

You'll need enough equity in your home to qualify for a home equity loan.  Those types of loans will often use the lower of the purchase price or the current appraised value for the first 12 months of ownership and will need at least 5-10% equity after the new equity loan is taken out.  How much do you owe on your mortgage and how much did you purchase the home for?


 


-------------------------------------------------------------------------------------------------
EQ 701, TU 685, EX ?
Wallet:
Amazon store $2500(10/12), Cap1 $1500 (10/12), Discover $1700 (11/1/12).
Message 3 of 7
ShanetheMortgageMan
Super Contributor

Re: Home equity loan

You'll have enough equity, usually the minimum credit scores are 660 or 680 and maximum debt-to-income ratio of about 45%.

 

There are two options for a new 2nd mortgage, either a fixed rate home equity loan (HEL) or a variable rate home equity line of credit (HELOC).  The HEL will give you all of the funds at once and with equal minimum required payments until the balance is paid off, usually over 15-30 year term.  The HELOC acts as a credit card with a limit, where you can borrow and pay back on it as you'd like, often with an interest only minimum payment during a "draw period" of typically 10 years.  After the draw period ends your access to borrowing additional funds ends and you repay the balance over the repayment period of usually between 10-20 years.

Helping people with mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 7
Sitori
Frequent Contributor

Re: Home equity loan

Ok I see. Which do you think is the better option? 
who do I go through for these? My mortgage is now with penny mac. Do I call them or are there other places that offer these? 

Thanks for your help! 


-------------------------------------------------------------------------------------------------
EQ 701, TU 685, EX ?
Wallet:
Amazon store $2500(10/12), Cap1 $1500 (10/12), Discover $1700 (11/1/12).
Message 5 of 7
ShanetheMortgageMan
Super Contributor

Re: Home equity loan

I don't believe PennyMac offers home equity loans/lines of credit, just traditional 1st mortgage loan programs.  If I was going to seek out a home equity loan/line of credit it'd likely be from a local bank (check with who you have your checking/savings with), as they often will waive all or most of their fees and since you only need about $20k then the fees they'd waive would be a significant % of the amount you are borrowing.

 

You might consider a HELOC for a larger limit than you intend to borrow, that way if you need to access your equity later on then you can without having to reapply.  Getting a HELOC limit higher than what you intend to borrow can also help lower your revolving account utilization, which impacts your credit score.  The big drawback of a HELOC is that it has a variable rate based on the Prime rate, which has seen many increases throughout 2022 and may increase a little further in 2023.  If you plan on paying off the debt quickly then the variable rate won't have as much of an impact since you'd be borrowing the funds for a shorter period of time.

Helping people with mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 6 of 7
oorhett
Regular Contributor

Re: Home equity loan

If you are a member of a good Credit Union I would go there first.

Home Equity Loan - If you need to pay the full amount to one contractor all at once then the Loan is the better way to go IMO

HELOC - If they are going to take draws over the course of 12 mo or something, or you have multiple contractors over a long period of time then you may want to consider a HELOC since you don't have to pay on the full balance from the start.  The drawback is usually they are adjustable rates and they could go up from where they are now 7.5%. 

 

One tactic you may consider is if you can pay for things with a credit card you could use a points card and earn a lot of points over a short period of time and pay off the card each month with the funds from the HELOC or Loan. 

 

Other Options are: Ikea Card, HomeDepot Card, or a Lowes Card if your doing it yourself




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