I was wondering if someone might be able to provide a bit help and information regarding home equity loans and somewhat investment strategy.
I'm a Arlington, VA resident but would like to get a fixed rate home equity loan on a home that I own in Richmond, CA which is near Berkeley/San Francisco. I'm wondering whether it might be better to go with a large national bank or a regional bank in this instance and whether someone has had experience on this front. Moreover, when people are getting involved with lines of credit are they going the interest only route or are they actually getting the loans that pay down the principal loan amount? I'm sure that this will depend on investment strategy but I was hoping to get some insight into what might make one choose one type of finance over the other.
Lastly, I'm interested in getting a FHA loan. But I'm not sure how the heloc would affect my ability to qualify for the maximum FHA loan here in NoVa/DC. What's a bit more is that I will be renting out the home that I am getting the heloc on so it should add substantially to my revenue and buying power, but I have a feeling they will look at the debt and say that I have less buying power due to the existing heloc. I was also interested in knowing should I go after one or the other first.
Thanks for reading this. I know there are a lot of questions but I'm really trying to figure out my overall investment strategy and am on a shorter time frame. I'm also open to reading if someone would like to point me in that direction.
@Upen Patel is a mortgage broker here in the DC area. He would be able to give you a good idea of how the HELOC will affect your borrowing power.
Hey! @Russell Brazil Thanks for the mention.
@Raphael Turner , why are you going with a HELOC. First off it is very hard to get a HELOC on an investment property. Next, it is impossible for it to me a fixed rate. The HELOC rates will be very high and will go up every time the fed reserve increases its rates.
From your comments, it looks like you are trying to take out equity from the CA property, to be able to purchase a property in DC. I would recommend a cash-out refi on the CA property. That way you can get a 30 yr fixed rate.
There are lot of factors that go into your DTI.
@Raphael Turner You can take out up to 75% of the value of your investment property through a cash out refinance. This would be a fixed rate loan that pays down the principal. It is a loan however, not a line of credit, so you can take the money out only once, not little by little as you would be able to do with a line of credit.
If you go this route, the fixed monthly payment will have to be factored into your overall DTI.
If you are able to find a HELOC, the actual monthly payment will be factored into your DTI.
Deciding which order to do things will depend on your overall income and expenses, the expected purchase price and payment on your new home, and how much you can rent your California property for. For loan purposes, be sure to get a signed lease and save a copy of your first month's rent and security deposit, as well as proof of deposit. AirBnb or other short term rental income will not help you qualify.
@Raphael Turner You could try Redwood Credit Union for the HELOC, we have one on an investment property in the north bay.
PenFed does HELOCs if I remember right...
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