How do I qualify for a 1st lien HELOC?

The qualification standards for the 1st lien HELOC can change from time to time. We will do our best to stay up-to-date on the most updated standards on this article.

Please note that the Kwak Brothers are not originators of loans and therefore cannot guarantee 100% accuracy of these qualification standards!

Minimum Credit Score:

• 620         Max LTV 80% Owner Occupied, 2nd Homes
• 700         Max LTV 90% Owner Occupied, 2nd Homes
• 700         Max 75% Investment properties

Acceptable property types      

Single Family Residence, 1-4 unit, condo, townhome

Condo – be careful over 80%, find out if under/over 4 stories, above 4 is considered high rise and can be tougher

Modular – must be site built on permanent foundation, can’t be rolled in on wheels and wheels removed

 

Debt-To-Income Ratio: 45% or Less

Required Equity: At least 10% for individuals with 700 FICO score or higher. 20% for individuals with less than 700 FICO score.

 

Unacceptable property types    

Mobile and Manufactured homes – single and double wide – if it was brought in on wheels it’s not eligible

Large acreage – over 10 acres can be challenging, land value can’t exceed 30% of total appraised value

Condotels – if has a lobby that people check into it’s a condotel

Commercial of any kind

Mixed use – commercial and residential combination

Geodome

Log Cabins

Tiny Homes

Maximum HELOC Amount $2,000,000

 

Waiting Periods                               

Bankruptcy – Chapter 7 and 13 – 4 years since discharge date – will update policy asap to potentially reduce waiting periods

Forbearance – Must be out of plan and have made 3 on time payments since exiting plan – Make sure to find out how much balance is being added to end of the loan as it will have to be paid or considered in LTV calculation – if still in forbearance default to PLOC strategy

Foreclosure        7 years since actual completion date

Short Sale            4 years since close date

Self Employed                                  

2 years filed tax returns required to determine 2 year income average – get 2 previous years Adjusted Gross Income (AGI) and do 2 year average

Straight Commission                      

2 year commission average required to calculate qualifying income – can be less than 2 years on job if in same industry and was straight commission in previous and current jobs

Base plus commission

2 year commission average – can be less than 2 years on job if in same industry and was straight commission in previous and current jobs

Part time Income                            

2 years – must be part time for at least 2 years to count as qualifying income

Rental income                                  

Need to active leases or lease that is over 12 months that has gone month to month

Vacation Rental Income               

If it does not have annual lease or at least 2 year rental income average it most likely won’t be considered qualifying income to be used in debt ratio calcualtions

Covid – Laid off                                 

3 months on new job if same line of work

2 years if change industry

Covid – Furloughed                         

1 month back on same job with 1 month of income documented

Gap of employment                       

Will require letter of explanation as to why gap occurred, ie. Covid, medical, must make sense

 

Check What Documents You Need to Apply HERE