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    1 Reply Latest reply on Oct 30, 2011 11:50 AM by phanio

    Equity Line of Credit - What do Banks Look For?

    beekrock Newbie

      I'm looking to get a business equity line of credit collateralized by a lien-free single family home that is owned by my company. Anyone know what banks require of a single family home in order to be collateralized? Someone told me that the house MUST have a kitchen in order for the banks to consider them "single family homes".

        • Re: Equity Line of Credit - What do Banks Look For?
          phanio Pioneer

          Yes - the home must qualify as a home.  Banks look for a couple of things for an equity line of credit.  One is equity.  Do you owe less than the home is worth.  Let's say the home is worth (in the market place not what you think) $100,000 and you owe $50,000 - that leaves $50,000 for a line of credit - on which a bank would loan up to 80%.

           

          Banks also want to make sure that you can make the payments - now, not after you get the funding.  So, with the above example - if the loan payment is $400 per month - they want to make sure that you have free cash flow that equals at least $400 per month.

           

          But, the first thing a bank will look at, regardless of everything else is your personal credit.  If your credit score is low, they will decline you loan right away and not waste time or effort on it.

           

          Other then that, it must be located in a residential or mixed zone and be classified (usually on the tax rolls) as a single family home.

           

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