The process for applying for a 1st Lien HELOC is very similar as to the process of applying for a traditional mortgage. Most 1st Lien HELOC lenders will maintain an 80% or 90% loan to value, meaning you’ll need to pay a deposit of 10-20% down on your financed home.
Financing a home is one of the largest purchases that most Americans will ever make. If you’ve been exploring your financing options, you might have heard of the power of a 1st Lien HELOC. We are in the midst of a financing revolution. One where many have replaced their mortgage with a 1st Lien HELOC and reaped large rewards for it.
Are you ready to buy your first self-owned home? Perhaps the more important question is, are you prepared to finance a new home? Wanting a new home and qualifying for the needed financing are two different matters. So you will need to complete some paperwork before getting very far into your home search. But do you know that qualifying for your first mortgage — in other words, your “first lien” — means you probably will also qualify for a first-lien HELOC loan? Are you asking yourself, “What is a HELOC loan, and why would I want one? If so, stay tuned as we go through the steps from qualifying for a first-lien HELOC application process to closing on a home.
A first-lien HELOC (home equity line of credit) can be a convenient way to finance a new home. But first, you need to qualify for a HELOC, which is roughly equivalent to qualifying for a mortgage. Equity, income, and credit scores have roles in both. Because HELOCs are not US government subsidized (as are the overwhelming majority of today’s mortgages), banks can be more flexible with HELOC applicants than government programs and agencies like Fannie Mae, Freddie Mac, FHA, USDA, or VA might be.
Still, you might not qualify for a first HELOC loan if your credit score is less than 700. A score of at least 680 is recommended, and one over 700 will let you enjoy the best rates and terms.
It is advisable to begin the loan application process with an estimate of how much you will need to borrow. Consider monthly payments, moving costs, necessary home improvements, etc.
What is a first-lien HELOC, and how does it benefit homebuyers? There are a couple of different ways.
When part of an “all-in-one mortgage,” a first-lien HELOC allows a homeowner to pay down more interest in the short-term while having access to any accrued equity. A savvy first-time borrower might choose this option.
Another option is to refinance. Since a first-lien HELOC is a credit line and mortgage in one, it can replace your existing mortgage.
It also allows you to withdraw cash (as a form of home equity loan) for the loan’s duration without needing to refinance.
At the same time, insightful and well-organized borrowers can speed up the loan pay-off. They can apply direct deposits to the loan’s principal, reducing the mortgage interest and term length.
In other words, payments go toward the mortgage principal and interest yet can still be withdrawn.
If you’re shopping to apply for a 1st Lien HELOC, then you should sign up on our site. We’ll connect you with the right banks to help you get the best terms for your 1st Lien HELOC and ensure you have the support you need to achieve the life changing strategy.
You want to make sure this loan is a good fit, and you understand all the disclosures. So it would be best to prepare yourself to ask and discuss the following or any related questions:
Don’t forget to ask your loan officer what you’ll need to prepare for the underwriting stage.
The more organized you are, the faster the loan approval process. So be sure to include all the documentation the lender requires for underwriting.
The documents typically needed for loan underwriting include:
If you get approval on your application, your lender will ask you to approve a particular interest rate. Understand that HELOC’s do not maintain the same interest rate scale as does a mortgage (because they aren’t subsidized by the US government). Even if you get a higher interest rate, you can still end up paying less in interest.
Once approved, the lender will coordinate final details with you (including closing) so that both parties can be prepared to close on the loan.
Underwriting is the lender’s process of assessing the risk of lending money to you. During this time, your Loan Officer will order and receive the appraisal and will submit the loan to the underwriter for the lending institution.
After the underwriter initially reviews your file they will likely request additional documentation and explanations for items that are unclear to them. Once you submit all the additional documentation the underwriter requires and they deem the loan to be satisfactory they will give the “clear to close.”
Once all the details of your first-lien HELOC loan are in place, it’s time to schedule the closing, pay the closing costs, and, finally, close on your loan.
Successfully qualifying for a first-lien HELOC application and completing it must seem like a huge relief. All those documents to prepare. All that time waiting for news of your loan approval.
If you’re a first-time homebuyer, you might have found this article a bit overwhelming. Many people do. So be sure to keep learning about this and other financial topics for more information on how to manage your money.
At FirstLienHELOC.com, we focus providing accurate and strategic information on using a 1st Lien HELOC to empower your financial life.
Sign up on FirstLienHeloc.com to get connected with a licensed lender who can deliver an all-in-one 1st Lien HELOC. They’ll walk you through the application process and help outline your budget, your numbers, and exactly how much you can save by replacing your mortgage.