Know where you stand before you apply

Other things that affect approval

Short answers to the rules that come up less often. If one applies to you, ask before you apply.

Existing liens and reverse mortgages

The property can carry no more than 2 existing liens, such as a first mortgage and an existing HELOC. A home with no mortgage can qualify too, with the HELOC in first position. Homes with a reverse mortgage or a HUD lien aren’t eligible, and an involuntary lien found on title, such as a judgment or tax lien, can lead to a decline. In California, eligible liens found on the title search may be paid off from the new line at closing, and a payoff statement can take up to 14 days.

Recently bought or added to title

A home purchased in the last 90 days isn’t eligible, and neither is an applicant added to title in the last 90 days. A recently opened mortgage that can’t be verified yet can also prevent offers.

Credit history

A bankruptcy must be more than 5 years old, and a foreclosure more than 5 years old. You also need no mortgage payment 30 or more days late in the last 6 months, no account 60 or more days late or derogatory in the last 12 months, and no non-medical collections over $500.

New credit and recent applications

Several recent credit applications, newly opened accounts, cards near their limits, or a recent decline elsewhere can prevent offers even when your score qualifies. So can a negative balance or repeated overdrafts in a bank account you connect. Avoid new credit until you’ve funded.

Home listed for sale

In California, a home currently listed for sale may still receive offers, with program terms that differ from an unlisted home, and some programs don’t allow listed homes. If listing records show the home on the market in the last 12 months and the application says it isn’t for sale, the application is declined, even if you’ve since taken it off the market. Talk to us first.

Mello-Roos

Mello-Roos doesn’t stop a HELOC on its own. The assessment is part of your property tax bill, and property taxes are typically counted in debt-to-income, so it can reduce how much you can borrow.

Unpermitted additions and ADUs

Unpermitted work isn’t a rule on its own, but it can affect the valuation and condition rating. Valuations generally rely on recorded, permitted square footage, so the space may not be counted, and if a desktop appraisal is used, a below-average condition rating isn’t eligible.

Inherited homes and trusts

An inherited home can qualify once probate is complete, you own it directly, and you’ve been on title for more than 90 days. A home held in a revocable trust qualifies — the full certificate of trust is reviewed, which adds a step. Irrevocable trusts, land trusts and life estates aren’t eligible.

Co-ops

Stock cooperatives aren’t an eligible property type, because you own shares and an occupancy right rather than real property. Condominiums are eligible. See Laguna Woods.