Home Equity Line Of Credit Versus Cash-Out Refinance Mortgages

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Home Equity Lines Of Credit Versus Cash-Out Refinance Mortgages

This BLOG On Home Equity Lines Of Credit Versus Cash-Out Refinance Mortgages Was UPDATED On July 20th, 2018

Home Equity Lines of Credit is a second mortgage on a home where homeowners can use it for any purpose they need.  Homeowners can use a Home Equity Lines of Credit to the following:

  • home improvement
  • pay off high interest credit cards
  • take a vacation
  • pay children’s tuition
  • purchase a second or vacation home
  • or for investments

HELOC Versus Cash-Out Refinance Mortgages With First Merit Bank

Many banks offer home equity line of credit and every bank has their own lending guidelines.

  • We will use First Merit Bank as an example on what they have to offer
  • Most banks have similar HELOC lending guidelines
  • Home Equity Lines of Credit is offered at banks and credit unions and not mortgage companies
  • Jaime Darwin of First Merit Bank offers home equity line of credit mortgage rates as low as 2.99% APR
  • They offer HELOC on amounts of $50,000 or more with a minimum draw of $20,000 at closing with an auto withdrawal paying system from a First Merit checking account

Benefits Of Dealing With Jaime Darwin Of First Merit Bank

Loan officers at Gustan Cho Associates refer out all home equity lines of credit loans to several banks. Among them is to Loan Officer Jaime Darwin of First Merit Bank:

  • Continuous access to available credit on your Home Equity Line of Credit
  • No closing costs on HELOC
  • Flexible payment options on HELOC
  • Ability to lock in fixed rate options
  • Mortgage interest may be tax deductible

SIMULTANEOUS REFINANCE  MORTGAGE CLOSING – HELOC AND/ OR TERM LOAN:

  • 89.9% Loan to Value for refinance mortgage loans on homes appraised at $500,000 and under
  • 85% Loan to Value on a refinance mortgage for homes appraised at $500,001 and $749,000
  • 75% Loan to Value on Refinance Mortgage Loans for homes appraised at $750,000 – $1,499,999
  • 65% Loan to Value on refinance mortgage loans for homes appraised at $1,500,000 – $2,999,999
  • 60% Loan to Value on refinance mortgage loans for homes appraised at $3,000,000 and over

SIMULTANEOUS HOME PURCHASE CLOSINGS – HOME EQUITY LINE OF CREDIT WITH FIRSTMERIT BANK

  • 80% Loan to Value on home purchases on homes appraised at $500,000 and below
  • 75% Loan to Value on home purchases on homes that are appraised at $500,001 TO $1,499,999
  • 65% Loan to Value on home purchases on homes that are appraised at $1,500,000 – $2,999,999
  • 60% Loan to Value on home purchases on home that are appraised at for homes $3,000,000 and over

Advantages Cash-Out Refinance Mortgages Versus Home Equity Lines Of Credit

Mortgage companies can offer cash-out refinance mortgages but not home equity line of credit. HELOC is only offered by FDIC banks and/or credit unions. There are many advantages and qualifying for cash-out refinance mortgages versus HELOC’s. Home Equity Line of Credit is much more stricter and has tougher lending guidelines than cash-out refinance mortgages.

In general, here are the credit/income requirements on home equity line of credit:

  • 700 minimum credit scores
  • Waiting period of seven years after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
  • Maximum debt to income ratio of 43%
  • Maximum loan to value of up to 90% CLTV

Here are the basic cash-out refinance mortgage guidelines:

  • FHA requires minimum credit scores down to 500
    • Maximum debt to income ratios up to 56.9%
    • 2 year waiting period after Chapter 7 Bankruptcy and 3 year waiting period after foreclosure, short sale, deed in lieu of foreclosure
    • 85% loan to value on FHA cash-out refinance mortgages
  • There are no minimum credit score requirements on VA Loans and no debt to income ratio caps
    • 2 year waiting period to qualify for VA Loan after Chapter 7 Bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
    • 100% loan to value on VA cash-out refinance mortgages
  • Conventional Loans has minimum of 620 credit scores and maximum 50% debt to income ratio
    • 4 year waiting period after Chapter 7 bankruptcy, short sale, deed in lieu of foreclosure to qualify for conforming loans
    • 7 year waiting period after foreclosure to qualify for conventional loans
    • 80% loan to value on conforming cash-out refinance mortgages

Bottom line is that it is much easier to qualify for cash-out refinance mortgages than it would be for a home equity line of credit and/or second mortgages.

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