Home Equity Line of Credit for Coops

Yes, you can obtain a Home Equity Line of Credit for your cooperative apartment. Basically, the underwriting guidelines are essentially the same as with any other property type; they are based on loan to value, credit score, debt to income ratios.

Loan to value is the percentage that your total loan amount, including the Home Equity Line of Credit for which you are applying, is of your coop's market value. A $600,000 total loan amount on a $1,000,000 coop has a 60% Loan to Value (LTV). Generally speaking on a coop, the lenders will go a higher loan to value than the cooperative board will allow.

Credit score is the middle score that is pulled from all 3 credit repositories (Equifax, Experian, and TransUnion). Home Equity Line of Credit are very credit score driven, if your score is too low, then you cannot qualify at all, if your score is high enough, you will not have to verify income or assets in order to qualify.

Debt to Income Ratio (DTI) is the percentage that your monthly obligations is of your gross monthly income. If it's below 40% including your housing payment, then you should be in good shape.

A couple of things about the Home Equity Line of Credit, it can be a good financial tool when used properly. However the borrower should understand that the interest rate is generally adjustable based on the Prime Rate as published in the Wall Street Journal. This means that Prime goes, your payment goes -sometimes up, sometimes down. If you have a Home Equity Line of Credit pay attention to the Federal Funds Rate. That will let you know what your interest rate is going to do.

Lenders are now allowing Home Equity Line of Credit borrowers to fix a portion of their balance's interest rate and payment, so you might want to inquire about the details.