Advice for obtaining a HELOC

[Annushka Alicea]

Hi Everyone. I am looking for some advice on how to obtain a Heloc on my primary single family home. My morgage was in forbearance but I have paid off and brought it current. My credit score is 600-605 range but I am working  to remove a a few late payments from my credit report and that should help it shoot up in the next few months or so. My credit card usage is about 85 percent usage but the equity in my home is about 200k to 300k. Can you advice me how to get a Heloc? Where to apply with such high credit usage? I would like to use some of the heloc to consolidate my debts which is about 50k or so. What are my best option? I am also considering a equity line of credit. Thank you for your help in advance.

[Andrew Postell]

@Annushka Alicea hmmm, I have some thoughts here that I think might help with what you are trying to do.

1. Cash Out Mortgage - A cash out mortgage can be granted to someone and the cash can be used to pay down debts to help the borrower qualify.  Now this might be a little counter productive if your current interest rate is 2% or something like that...but the concept is the same.  Worst case scenario I still might suggest to examine this option.  Meaning, if you pay off all of your debts, then your credit score will really increase.  It might take 1 year to do, but in a year rates might be lower any ways.  So having a higher score, better rates...maybe it's a temporary solution that you can use to your advantage.

2. HELOC - We can use the same concept above here - at least in theory. Ask if you can open a HELOC to pay off those debts. That means that your HELOC will start with a balance right away, but maybe it's possible in the same way a cash out mortgage is. Any traditional bank can provide a HELOC to you (well, 99% of them). They might have an issue with your current credit score though. Don't be surprised if they need you to be at 660 to get one. But try smaller, local lenders first. Maybe even ask the "New York City Real Estate Investing" facebook page which banks are the most flexible. I think there are several of those pages/groups. But certainly lean on locals to help guide you to good lenders. The smaller the lender, the greater chances of them being more flexible with their qualifications.

Hope some of that helps in some way.  Good luck!