Can I obtain a home equity loan or line of credit immediately after purchasing a home in order to pay off credit card bills? The home I am looking at is a short sale & is priced under market value.

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Answered by Chad Freeman, Branch ManagerPRO+ in Bethesda, MD
Hello:

It could be that there are some institutions that may have their own internal overlays that say otherwise, but generally speaking, the answer is "yes". In most cases, an appraisal will not be required and some lenders will even pay your closing costs.

Hope that helps. | 04.17.14 @ 19:34
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Ted — Have to disagree. It's possible the purchase appraisal MIGHT be acceptable to the lender for the second, but unlikely. It's also unlikely lenders will use full market value immediately after closing solely because you bought a short sale. Sounds very iffy to me. | 03.02.16 @ 04:49
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 06:26
Answered by Caroline Gerardo, C G Barbeau in Newport Beach, CA
In order to get a second or HELOC you need a middle score of 721 and be owner occupied. You will also need real equity, not just perceived. Above is incorrect. The lender will require their own new appraisal - they will look at comparable sales in last three months with similar square footage. Maximum combined loan to value cash out second (after you close is 80% CLTV - your first would need to be 75% to get 5%)

If you close a HELOC or second concurrent with the purchase, and you can, owner occupied conventional can go combined or CLTV 89% with that 721 FICO and full doc qualifying.

Seconds are higher rates that firsts, and lenders consider them higher risk because they would need to pay the first in full to foreclose. | 12.05.14 @ 19:17
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 06:26
Answered by Ted Rood, Mortgage BrokerPRO+ in Maryland Heights, MO
I'm somewhat in agreement, and disagreement, with both prior answers. It's highly unlikely a new lender would close on a HELOC without either using the appraisal from the purchase (would be interesting to see how much above the sales price it actually was) or their own value estimate of some kind. In theory, some credit unions will loan up to 95% of homes' values, depending on credit scores and local programs. Credit score requirements are going to vary by lender, there are no mandated standard required scores. The kicker in your whole question is whether anyone will use the current value, rather than the sales price, and how that value would be determined. I'd start asking locally, you'll get far more pertinent advice by asking banks in your market as programs and credit requirements can vary widely by lender. Hope that helps, Ted | 10.21.15 @ 04:05
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 06:26
I largely agree with Ted, especially on the fact that there is no standard minimum credit score. I still see HELOC's to 100% but of course, you pay for it in rate and the rest of your profile must be sparkling to be able to go that far. Purchase appraisals very often come in very close to the purchase price, even in a short sale because the appraiser doesn't need to stick their neck out too far. On a refi, the appraisal rules could have you use the purchase appraisal, get a new appraisal, not need an appraisal (very rare) or make you wait 12 months before they'll use any value other than the purchase value. Varies by investor guidelines.

All comes down to cost / benefit as always: If your credit card balances and interest rates and minimum payments are high enough, the cost to obtain the HELOC or even refi the existing mortgage under the a refi appraisal, could be easily overcome by what you'll save on credit card payments. | 01.29.16 @ 21:38
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 06:26
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