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Posted by: doreen k on 2010-03-08, 10:21:54
From your other question you posted, you mention a relationship with a credit union, so the best place to start would be with your existing credit union. But first, go to annualcreditreport.com and check your credit history for free, to determine if there are any errors on your credit report with any of the three major credit bureaus: Equifax, Experian or TransUnion. Next, you complete an application with your credit union or other lender. If you anticipate your income will be lower in the next few months, you must disclose this or the application could be considered fraudulent. You mention in your other question you plan to use the proceeds to cover essential living expenses while on maternity leave. If you do not have the capacity to repay the loan, you probably will be turned down. However, let's assume for now that is not the case. After taking the application, the credit union will check your credit history and score and order an appraisal of your home's value. Sometimes, credit unions waive those fees, but it's possible they will charge you an application fee, credit report fee, and appraisal fee. These could add up to several hundred dollars, and must be paid even if you're denied the loan. To qualify for the home equity loan or line of credit, your total loan to value ratio (including the new loan) typically cannot be higher than 90%, and some lenders will not exceed 80% loan-to-value. So, if your home is worth $100,000, the combined mortgage amounts (first mortgage plus home equity loan/ line) cannot be more than $80,000 for 80% loan-to-value or $90,000 for a 90% loan-to-value ratio. Also, your total loan payments, including credit card payments, mortgage payments, home equity loan/ line payments and all other loan payments typically cannot exceed 40% of your gross monthly income. So, if your total monthly income is $2,000, for example, your total monthly loan payments cannot be more than $800 for all loan payments combined. The risks are that you could lose your home if you cannot pay back the loan. And, if the lender has to foreclose on you to get their money back, they can seek a deficiency judgment for up to five years after the foreclosure sale and they then have up to 20 years to collect in most states. In short, you could place the next 20 years of your life at financial risk. Knowing your situation, I would recommend against this plan. |
