HELOC & Seasoning Requirements

[Anthony Lee]

After talking to 3 different big banks who said "No due to seasoning requirements," I finally got my credit union to refinance with no cash out on the home my parents deeded over to me 3 weeks ago. The refinance closed today and we simply just paid off my parents existing loan and closing cost. I also asked the credit union about getting a HELOC and they said I had to wait 12 months due to seasoning issues. The house appraised at $360K and I owe $210K. Id like to tap into this equity to help fund my search for my first fixer upper single or multi family unit. Do I wait the 12 months or should I just call every bank I can find? Regardless, I'm probably going to try at least the 3 local banks in town before finding other funding options.

On a side note, why do banks have to "season?" If they know I have a great credit score, great income, and equity in the home, why "season?"

[Frank Chin]

Don't get your self all riled up over this. Either find a bank with shorter or no seasoning requirements, might take you a while, and by the time, 6 months or a year has gone by, and guess what, you met the seasoning requirements.

I worked for finance company for a while, and they have simple rules to implement, such as income requirements, 12 months at the same job etc. So we'll have someone who just got a new job at double his former salary, he meets the income requirement, but not the 12 month at the job requirement. You can't imagine how many customers get upset over this. I guess the best answer is when someone goes through a major change, chances are greater that things can go wrong. Unless you have loan officers do an exhaustive analysis of the persons life, you're stuck with the stupid but simpler rules.

Talking about stupid rules. You mentioned that you plan to take a HELOC to do investing. I owned a home for a while, got a $120K Heloc to do investing. Found something, a foreclosure, and the bank providing the mortgage wanted to know where the down payment came from. I told them "from the HELOC", figuring it was no big deal as it's only $14,000. Wrong answer. It's NO NO NO, can't be borrowed funds, it's got to be seasoned funds.

Fortunately, my wife helps her mom with banking, and had joint savings account with her mom for many years. So we said, "in that case, the money will come out of this savings account that been opened 20 years, is that seasoned enough?" It's actually her mom's money, but for that bank, that's seasoned funds with my wifes's on it. They confirmed the info. So for the bank, they can check off that their rules are followed.

So you see, for us, it's mom's money, but for the bank it's good seasoned funds with one of our names on it. 

I remember going to the closing, I was thinking of bringing the HELOC checkbook to make payments, thought better of it, and didn't. We actually transferred funds to our checking, and wrote checks out of that. But in the final analysis, the money actually came out of the HELOC.

So if your thinking of using the HELOC for investing, keep this stupid rule in mind.