EQUITY LINE FOR DOWN PAYMENT
In this tight inventory market the homebuyers who are most prepared to write a contract are the ones who will end up with the home. Everyone in the homebuying market should get pre qualified for the purchase. On a financial level this ensures one has considered credit score, income, assets, and acceptable house payment. On another level, one can be more at ease with the process.
What I see a lot in the current homebuying market is that sellers generally will gravitate toward the offer that is what they consider the "best". Usually that means no contingencies for the sale of another home, the higher down payment option and the higher net profit.
Using an equity line for down payment: Many homeowners are sitting on a lot of equity, which they want to use to buy the next home. One option is try to buy before selling the current home (results in a contract contingency). Another option is to tap into equity by accessing a equity line on the current home. An equity line can be set up before it is needed and then is ready to go at a later date when the right next home comes around.
Often equity lines have low closing costs. Institutions have varying maximum LTVs they are willing to lend, some may go to 90% or higher. Equity lines have payments for the money you draw from the line. Until you use the money you are not paying interest for it.
Keep in mind when an equity line is set up a lender will count that into your total debt when qualifying. If your goal is to buy before selling, you would need to qualify for the current house payment, equity line and the new home purchase. You'll want to make sure to talk to a loan officer about your options for using your equity for the next home purchase to see what works best for you.
An equity line for down payment can be a really good option to alleviate the stress of the homebuying process. Like any other product, it is not for everyone, you want to fully consider what works best for you.
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