HELOC or Loan even a remote possibilty these days? (fixed rate, interest, credit card)

[Maverick494]

I bought my house a year ago. I utilized my VA loan and I had a 0 down loan. I can make my payments and have not missed one. I had some problems with a credit card company about a year ago and got a 60 day late, but other than that I have fairly good credit. last I checked I was sitting in the low 700's for scoring. I am trying to obtain a home equity product to consolidate my remaining credit cards, a home improvement loan and another consolidation loan that didn't cover everything.

according to what I can find my house value is ranging from 199000 to 218000. I only owe about 179000. I am trying to get about 30000 out of the house which puts me at a very high LTV even if you take the high side of valuation and negative if you go extremely conservative. If I can get the loan however it will change my cash flow from just even to about a +500 - 600 dollars a month allowing me to accelerate my debt pay offs. do the banks even consider the positive cash flow in their consideration of a loan?

So far I am at a loss of what I can do to show a company that it is a good risk to loan to me. Is there anything I can do or am I stuck waiting out this market crash with no options? I can do it, but the two loans I have are at fairly high interest rates and I would like to get something to help me get them lower. I also have a possibilty of having my 11 year old daughter coming to live with me now and the added cash flow will help me cover the change in costs should that happen. I know banks don't care about those things, but I wish they did.

[brokerdave]

we havent been funding HELOCS for a while now.

[tool123]

The banks should get rid of HELOCS. This is the reason why we are in this situation. A home is not a bank account.

[Daddys///M3]

Look into a VA cash-out refi. It won't provide you with all of the cash you are after as you will be limited to 90% loan to value. The net benefit of a reduction in your total monthly debt obligations should be a positive factor for qualification purposes. You shouldn't have an issue with available entitlement as the existing VA loan will be payed off with the cash out refinance loan, and as such the entitlement for the existing mortgage can be restored for the purposes of obtaining the new mortgage. As long as the 60 day late was over 12 months ago and you are not only current on that account but have paid everything on time since then, the late should not be an issue.

[Maverick494]

Originally Posted by tool123

The banks should get rid of HELOCS. This is the reason why we are in this situation. A home is not a bank account.

A home may not be a "bank account," but it is indeed an asset that has a value. If you don't owe the full amount of the asset and want to use the remaining value to get into a positive cash flow situation, then I see no reason not to fund these kinds of loans.

As for a cash out refi, it doesn't make good sense to cash out refi for only 1/3rd the amount of the cash I need just to raise my house payment and get a much worse interest rate on a first mortgage.

This situation was not caused by home equity products. It was caused by loaning money to people who are completely unable to repay the first mortgage loans they took out. Once all these extra buyers hit the market the market adjusted sharply upwards because the demand adjusted sharply upward because loans were available to many more people even if they should not have been. The other side of this are the people that opted to do a cash out refi and they took an ARM during that. That is still a first mortgage though.

Now I agree that there is a small portion of people who are now upside down on their houses due to the sharp readjustment, but so far I have not heard of many of them who have lost their homes to forclosure because they are still making their payments. My parents are a prime example of this. They have a HELOC, they owe more than the house is worth, but they are in no danger of forclosure because their first mortgage is fixed and they are still making payments no problem.

If you wanted to take away the ability of someone to use an asset to get cash to consolidate things like credit card debt, then you would have to imagine that there needs to be some other options that aren't insane interest rates for people like me who want to consolidate debt so they have a positive cash flow. Why would it make good sense for a bank to loan money with no asset backing it though? answer is they won't.

[davidhomes]

I think what might be your easiest way is going with an FHA cash out refi to 95%. HELOCs that are left are at about 75% ot 80% CLTV. You are already over that so you cant get a HELOC. Good luck on this one.

[SmartMoney]

Originally Posted by Maverick494

A home may not be a "bank account," but it is indeed an asset that has a value. If you don't owe the full amount of the asset and want to use the remaining value to get into a positive cash flow situation, then I see no reason not to fund these kinds of loans.

As for a cash out refi, it doesn't make good sense to cash out refi for only 1/3rd the amount of the cash I need just to raise my house payment and get a much worse interest rate on a first mortgage.

This situation was not caused by home equity products. It was caused by loaning money to people who are completely unable to repay the first mortgage loans they took out. Once all these extra buyers hit the market the market adjusted sharply upwards because the demand adjusted sharply upward because loans were available to many more people even if they should not have been. The other side of this are the people that opted to do a cash out refi and they took an ARM during that. That is still a first mortgage though.

Now I agree that there is a small portion of people who are now upside down on their houses due to the sharp readjustment, but so far I have not heard of many of them who have lost their homes to forclosure because they are still making their payments. My parents are a prime example of this. They have a HELOC, they owe more than the house is worth, but they are in no danger of forclosure because their first mortgage is fixed and they are still making payments no problem.

If you wanted to take away the ability of someone to use an asset to get cash to consolidate things like credit card debt, then you would have to imagine that there needs to be some other options that aren't insane interest rates for people like me who want to consolidate debt so they have a positive cash flow. Why would it make good sense for a bank to loan money with no asset backing it though? answer is they won't.

Unfortunately, there are buyers that put 20% down on their homes, then took out a HELOC, now can't pay back the loans (A credit, fixed rate, not interest only, nor ARMs). Not only have they lost the original 20% equity, they have lost at least another 10%+. It's been proven.....when someone owes more than the home is worth, the incentive to continue to pay the mortgage is gone. The ATM analogy, while it may not have hit home with you, yet, is responsible for a very large percentage of our failed loans. This is not a hit and miss theory, it's at crisis levels, here and now. Everyone thinks our crisis is due to subprime loans or liar loans (no doc). That is but a small portion of the problem and just not true. Look around you. Thirty year, fixed rate loans (some at 5.5%) are going belly up because the homeowner doesn't want to take the next 20 years of their lives paying 50K to 100K more than what their home is worth. Read your weekend papers legal notices. Saturday I found former neighbors with their homes in foreclosure......one is a retired Marine officer that I am still reeling after reading his and his wife's name. They have been in that home since 1983! A recent poll showed that 78% of Americans thought home values had decreased significantly. From those SAME Americans, only 12% thought their home had lost value. My point? There are many people nodding their heads, agreeing we are in trouble, but are clueless that they, too, are under water with the rest of the country. Unfortunately, until more Americans have a better grasp of what is happening in their community, understand why their neighborhoods are not immune, we will continue to have no resolution in sight. This is the biggest case in history of mass denial. And because many will not blindly support a bailout bill (thank God), it's going to have to become painful (thank God), but at least we as a people, will understand something must be done, and not without thought and foresight. And we will understand that special interest groups, like ACORN, are not entitled to stick it to the citizens over and over, again and again. And that a person must prove that they are credit worthy before they get a mortgage (shock!) I really did not mean to pick on you, but wanted to point out the "I am not part of the problem" is why HELOCs are an endangered species. That to avoid getting raped on rate, you will now need 30% down. Things have already changed. It's those that are not aware of if that are indignant upon realization. Fortunately, many would have trouble sleeping at night walking away from their financial obligations. I suspect that is keeping your parents in their home, and, the added question of where would they go if they walked from their mortgage? But please don't think crisis is confined to ARMs or interest only loans....they may have been the first loans out of the gates, but all of the rest have followed.

[SmartMoney]

Sorry folks, I tried to edit my Wall of Words and was not successful. I apologize for the difficult read....it's the kind of post I wouldn't read myself.

[tool123]

Solution to problem: Remove Jumbos, HELOCS, ARMS, interest only and Refi-cash outs. The only type of loans the bank should give is a fixed loan with 20% or more cash and add a higher debt-income ratio.

Then maybe I will lean in bailing out my USA neighbors for there stupidity with higher taxes.....but to assume the status quo on the way the banks do business is why I do not support the 700B bailout.

[sheenie2000]

Originally Posted by Maverick494

A home may not be a "bank account," but it is indeed an asset that has a value. If you don't owe the full amount of the asset and want to use the remaining value to get into a positive cash flow situation, then I see no reason not to fund these kinds of loans.

.

Who's to say that asset has value? Just because you think it has value and maybe an appraiser as well thinks so, does not mean that buyers will feel that way. You can only 100% know for sure its value after it's sold.

Also it may not be a good idea to take out a HELOC for credit card debt. Depending on what the CC debt was for, would if you get a HELOC and then keep racking up more CC debt, you'll get yourself more into a hole.