When I got my HELOC the "appraisal" consisted of the lender having someone drive by the house and take pictures from the street to check external home condition and put together some comparables in the area. Very quick and easy and they never bothered me.
Investor · Kansas City, MO · Member since 2018 · 117 posts · 46 votes
7y
@Natalie Hahn I've heard great things about Pentagon Federal Credit Union even though it's not local to your area. I think they are hard to beat if you qualify for the 5.5% APR.
@Natalie Hahn any particular reason you want a local CU? I was researching HELOCs 2 months back and had found Digital Federal Credit Union to offer the most competitive rates. It is not local but is very accessible.
@Natalie Hahn any particular reason you want a local CU? I was researching HELOCs 2 months back and had found Digital Federal Credit Union to offer the most competitive rates. It is not local but is very accessible.
Great, thanks for the tip! I was just looking for local ones because I thought it'd be more convenient to talk in person. Does it really matter where you get your HELOC or do you pretty much just find the lowest rates?
Granada Hills, CA · Member since 2019 · 97 posts · 313 votes
7y
I'm using third federal. Rate is -1.01% to prime as reported in the WSJ. no fees... at all. except for $65 per year 2-10 of the draw period. Payments are principle and interest. Far and away the best offer I found.
Rental Property Investor · Bay Area, CA · Member since 2018 · 64 posts · 39 votes
7y
I went shopping for a HELOC last year and wound up using StarOne CU, primarily because most other banks wouldn't offer a HELOC over 200-300k (regardless of LTV) and the rate was reasonable (adjustable, currently 5.5%).
When I got my HELOC the "appraisal" consisted of the lender having someone drive by the house and take pictures from the street to check external home condition and put together some comparables in the area. Very quick and easy and they never bothered me.
Payments on a P+I HELOC are going to be more consistent than on an interest only HELOC that balloons up after the draw period. Lenders are qualifying you based on the assumption you're going to max the line. The more advantageous D/I ratio is going to depend on whether the interest only lender is going to use the draw or repayment period payment to qualify you.
So it has less to do with how Third Fed does things and more to do with how the other lender will. I'm not going to speculate on that since I'm not an underwriter. The Max line, however, is going to be capped by your L/V ratio as well. So the difference between the lenders is going to disappear as the customers ability to replay the loan (higher D/I ratio) ceases to be the limiting factor.
If the D/I ratio is driving any material difference in the size of the line then it's a major concern for the lender as compared to the L/V. I'd do some major soul searching before taking less favorable terms on a larger loan amount when one of the lenders is concerned about ability to make the payments - particularly when you're only getting the larger line from an interest only lender if they're looking at your ability to make draw period payments and not repayment period payments which will be roughly twice a large.
Sorry I don't have a simpler answer, but I hope my rambling is helpful. Best, David
also, should mention third fed only doesn't do investment property heloc, sorry.
Hey @David Lutz can you confirm what the underwriting process is like? Do they require tax returns?
Hey Cliff. The process is pretty streamlined. They do an automated property valuation or a drive by, which is free. If you don't like those numbers you can request a formal appraisal but that has a cost you pay. Assuming you want to move forward you have to submit paperwork for any income you're using to support your D/I ratio. That included my tax returns as well as rental agreements for properties I had purchased since my last returns. In general the process was pretty easy, but slow. I think it took about 4 months from when I started until I had the HELOC checkbook in my hand.
One issue I ran into recently is that credit unions (at least Third Fed) will only write you a HELOC if you have 5 or less mortgages. So if you have a primary house and more than 4 investment properties you'd need to use a different lender. PM me if you have specific questions and I'd be happy to answer them.