Home Equity Loans in Texas
A few notes of importance:
- This only applies to a homestead property, that is the customers primary residence
- LTV refers to Loan to Value, meaning the loan amount as compared to the value of the home. As an example, a loan of $75,000 on a home valued at $100,000 would be a loan at 75% LTV.
- These specifics only apply to Texas cash out loans in the State of Texas – obvious, but I had to put it in here.
- Although the actual Texas Cash Out Laws in Texas have not had any “major” modifications in the last few years, there have been minor adjustments made, that does not mean that future changes will not occur.
First, and foremost, I will highlight some of the most important points of Texas Cash Out loans:
- A person can only have one homestead propety
- Any Texas Cash Out loan is limited to a maximum of 80% LTV
- Only one Texas Cash Out Loan may be given in any 12 month period
- A 12 day “cooling off period” , known as the 12 day letter, is required on every transaction
- A maximum of 3% of the loan amount can be charged to the customer which includes all closing costs
- Once a Home Equity loan is taken on a persons homestead, all transactions following from that point on (with the exception of the sale of the property) are considered Texas Cash Out loans.
- In regards to the last point, just to further clarify, even if you are refinancing the balance of a current Cash Out loan and not getting any new cash out, it is still considered a Texas Cash Out loan. The rule is quite simple, once a cash out, always a cash out loan.
- Every owner of the property must given the HUD-1 settlement statement for review at least 24 hours prior to closing your loan
The process of obtaining a Texas Cash Out loan is really only slightly different than a home equity loan or refinance loan in any Debt Relief Texas other state. Yes, the documentation and requirements are different, but the process itself is very similar.
Before applying to obtain a cash out loan in Texas, you have to realize that you are limited, by State Law, to a maximum of 80% LTV for the new loan. So, if your house is worth (appraised value) of $200,000, then the maximum loan you can get, including any/all closing costs involved is $160,000. So, if you currently owe more than $160k on your current mortgage on the house, you wiil not be able to obtain a home equity loan in Texas. I only say this to save you some time and effort if it is your desire to get cash out or obtain a debt consolidation loan on your homestead property. You can also use this figure to estimate as to how much cash will be available to you from your new loan as a maximum amount.
You can also expect that your options will be more limited than if you were looking to simply do a rate/term refinance (refinance the balance of an existing loan) or purchase a home. Your options are more limited because not all lenders will do Texas Cash Out loans. The reasons are a combination of them not willing to adjust to the more stringent documentation requirements of the Texas Home Equity loan, some are simply because they believe the documentation and legal restrictions are simply too much of an additional burden on them to offer these types of loans. Understand that while the process itself is not that different from the consumer stand point, from a lenders stand point the differences are more unique and do require the lenders to essentially have a separate set of documents and, most likely, additional staffing just to manage and keep up with any/all changes to Texas Law regarding these loans.
The application process will be essentially the same as any other mortgage loan. You contact your mortgage broker or one or more mortgage lenders, give them your information and you are on your way. Once your applciation and credit have been evaluated, you will, as in any other mortgage transaction, receive a Good Faith Estimate and Truth in Lending within 3 days of you giving your information on an application. This can be used to compare your offers and to help you make an educated decision as to which lender/broker to go with. Once you have made the decision as to which company you will use, you will then be sent a disclosure package which will contain initial RESPA disclosures, other state required forms, lender required forms, and a list of items that you will need to provide along with these documents in order to get your loan completed. I have another section for disclosures (posting to be completed shortly), so I won’t go into the specific disclosures other than the ones that apply strictly to Texas Cash Out loans.
You can expect your loan to take longer than a standard mortgage loan. The reason is that Texas Law requires a 12 day cooling off period, so, your transaction cannot take place for at least 12 days after you sign that document which essentially states your rights as a consumer. In most cases, the delay may only be a couple of days as during that time period the normal other items can be taken care of simultaneously, ie., the appraisal, preliminary title report, and the gathering of the required documents from you, the consumer. I am simply saying that if you are anticipating your loan to done inside of two weeks, then you know now, that it is simply not possible.