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I've signed a contract on a place at the beach and need some advice on the loan. I want to go conventional to avoid paying PMI and without escrow will be required to have around fifty thousand at closing. I have the funds but would prefer using about twenty thousand and an equity line for the rest. I intend to pay off the equity line off within a few years. The equity line would be on my primary residence which is paid for. I'm self employed and the interest on the loans would be a write off. Could someone please inform me if this would be logical or am I way off base? Also, my credit score is 798 and I've already been pre-approved by BB&T but other recommendations are welcome.
Thanks in advance.
...but would prefer using about twenty thousand and an equity line for the rest.
A HELOC you already have in place and can draw from?
Or starting from scratch?
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I intend to pay off the equity line off within a few years.
Noble intentions. good for you!
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Could someone please inform me if this would be logical or am I way off base?
Eminently logical... and even rather common until a few years ago.
The hiccup today is the appraisal and credit approval process.
Which is not as easily accomplished as it was a few years ago.
I'm waiting to see the mortgage brokers start clamoring for the chance to write up your loan.
Good luck with it.
I don't have an existing equity line in place so I would need to start from scratch.
Although I have additional funds, with the economy in its current state I will sleep better at night with the added money in the bank as a safety net in the off chance business slows for me. I would be willing to pay the additional cost of an appraisal if that is required but could you elaborate on the hiccup you refer to with the appraisal process? My primary residence is worth about 106,000 and I’m looking to borrow 30,000 on it.
As a side note, it wasn’t my intent to post here to shop for a broker just looking for suggestions and others input. I’m not as knowledgeable in loans as most on this forum so I do appreciate your help.
A client of mine did something similar a few months ago without an issue. However, if I recall correctly, they did a cash-out refi on their existing home instead of an equity line.
If your debt ratio can qualify for the equity line along with the mortgage payment, and the lender knows what the funds will be used for, then it'll be fine. However a lot of home equity lenders do not like their loan to be used to help acquire new real estate, so it's something you'll have to ask.
HomeHuntress would I qualify for a cash out refi even though my primary residence is already paid for? This was why I thought equity loan. Would there be an advantage to a refi over equity?
Shanethemortgageman I don't believe the debt to income will be a problem because the bank has already told me I would qualify for more than the asking price but that was with one mortgage. If I do two separate loans do the guidelines for debt to income change? Also, would the bank be more likely to allow an equity loan to purchase another property or would I have a better chance working with a broker?
The debt ratio guidelines are same whether you just take out 1 mortgage on the new home or also take out a home equity line of credit on your current home. Each financial institution will have a different outlook on what the cash out funds can be used for. Mortgage brokers don't really deal with home equity loans or lines of credit anymore, they are primarily a bank offered loan program.
It's a great way to purchase additional properties. Another consideration is that you are able to afford the equity line in addition to the mortgage you currently hold on your first property.
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