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Roxie

How strict are lenders on score for a HEL

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We just closed at the end of last month and we have already earned 120K in equity and we are looking to take about 60K out to get our rear landscaping in and pay off one of our vehicles as well as make some other improvements like painting the inside and changing out some of the contractor grade fixtures and such.

 

I am worried that we will not get approved for the loan even though our credit situation has changed drastically since the closing. We had to pay off all CC's in closing and the actual purchase of the house is not reflecting on our credit reports yet which I understand instantly improves your score?

 

Common sense would tell me that the qualifications are not as strict for a HEL since it is technically a "secured loan" and you are really "borrowing from yourself." But from my experiences, things are ALWAYS more complicated than they seem.

 

Roxie

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Your scores have probably dropped a bit actually. So unless you had really good scores when you got your mortgage, Give your mortgage a couple of months to season and to get the CRAs updated by the CC companies, then go for it.

 

As far as complicated? No, relatively easy if the borrowers have their ducks in a row.

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Most prime equity programs require that the lesser of the purchase price or current appraised value to be used to determine maximum loan amount and LTV/CLTV within 12 months of the sale date. There are a few ALT-A programs out there that would let you use the current appraised value, but you will be paying a higher rate and your FICO score will need to be in the upper 600's.

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