TEXAS FIVE STAR REALTY

HELOC (Home Equity Loan Of Credit) LOANS 

HELOC is a Home Equity Line Of Credit which is a line of credit secured by a property that a borrower can draw from, up to the amount they're approved for.

State Restrictions: HELOC is NOT available in Texas, Vermont, and Iowa. Tennessee primary residences are ineligible. ^[1]  However, HEL (Home Equity Loan) is an eligible product for Texas refinances with 50(a)(6) provisions.  

Texas Refinances With 50(a)(6) Provisions: The client cannot pay off the HELOC and keep it open in State of Texas.

The following definitions, Terms and Conditions are derived from UWM website^.

Standalone HELOC – Tied to a property that has an active mortgage already attached to it. The HELOC and the active mortgage don't need to be from the same lender. ^[1]

Piggyback HELOC – Also called a 2nd or Simultaneous Close HELOC. The HELOC is done at the same time as the first mortgage on the subject property, typically with a purchase transaction. Both transactions are closed by UWM. ^[1]

Click on the specific link shown below to jump to that specific section of requirements and description.

GENERAL TERMS

GENERAL PARAMETERS

Key Product Features

Basic Requirements

HELOC – YELLOW

ˇ         PARAMETERS

ˇ         APPRAISAL VALUATION REQUIREMENTS

ˇ         CREDIT REQUIREMENTS

HELOC – PINK

ˇ         PARAMETERS

ˇ         APPRAISAL VALUATION REQUIREMENTS

HELOC - PIGGYBACK

ˇ         APPRAISAL VALUATION REQUIREMENTS

ˇ         CREDIT REQUIREMENTS

PRODUCT COMPARISON

INCOME REQUIREMENTS

THIRD PARTY DOCUMENTATION

GENERAL TERMS

Note Rate – The interest rate the loan closes on

Draw – Dollar amount the borrower pulls from against the available line of credit

Initial Draw Amount – The dollar amount the borrower pulls from the available credit line at closing

Draw Period – Timeframe in which the borrower is able to withdraw funds from the available line of credit. 3-year and 5-year options available.

Repayment Period – The timeframe in which the borrower repays the balance owed. Once the repayment period begins draws are no longer permitted. The outstanding balance becomes the loan amount.

Max Loan Amount – The maximum dollar amount that can be financed (borrowed) with a HELOC

Total Line Amount/Max Loan Amount – The highest balance that can be drawn on the HELOC

CLTV – Combined Loan to Value

1st Lien Mortgage + 2nd Lien Mortgage Balance / Appraised Value = CLTV

Ex. Owe $300,000 on 1st mortgage, drew $75,000 on HELOC. Appraised Value is $550,000. $375,000 / $550,000 = 68.18% CLTV

HCLTV – High Combined Loan to Value or Home Equity Combined Loan to Value

1st Lien Mortgage + 2nd Line Total Line Amount / Appraised Value = HCLTV

Ex. Owe $300,000 on 1st mortgage. Total line amount (the highest balance available) is $100,000. Appraised Value $550,000. $400,000 / $550,000 = 72.73% HCLTV

Interest-Only Payment – Monthly interest payment borrowers will pay during first 10 years of the HELOC.

Fully Amortized Payment – Monthly payment that will apply towards principal and interest during repayment period of the loan.

GENERAL PARAMETERS

Rate Cap: 18% unless otherwise limited by state or regulatory requirements

Floor: 4%

Index: Prime Rate (resets monthly)

Margin: Subject to the rate sheet

Note Rate: Prime Rate + Margin

Qualifying Rate: Note Rate + 2%

Qualifying Payment: Qualifying rate over amortizing repayment period

• EX: 20-year HELOC at 8.5% rate. Qualifying payment = 10.5% over the 10-year fully amortization period.

AUS: No AUS run on Standalone or Piggyback HELOCs.

• Standalone – must follow Fannie Mae guidelines
• Piggyback – must follow the AUS ran on the 1^st Lien Mortgage

Underwriting Fee:

• Standalone – $1,250 underwriting fee
• Piggyback – $590 additional underwriting fee (on top of the underwriting fee for the 1^st lien)

Pre-payment Penalties: None

Correspondent Eligibility: HELOCs cannot be correspondent loans, HELOCs must be closed in UWMs name

Primary Residence HELOCs are still subject to 3-day rescission

Key Product Features

Draw & Repayment Periods: Borrowers have a 3-year or 5-year draw period to withdraw funds, followed by a repayment period where draws are no longer permitted. ^[1]

Payment Structure:

• 30-year term: First 10 years = interest-only payment; Years 11-30 = amortized over 20 years
• 20-year term: First 10 years = interest-only payment; Years 11-20 = amortized over 10 years ^[1]

Rate Terms: Prime Rate index + margin, with a 4% floor and 18% cap (unless limited by state). The qualifying rate is Note Rate + 2%. ^[1]

Basic Requirements

Eligibility:

• Primary, second home, and investment properties (1-4 units)
• 2nd lien position only
• No prepayment penalties
• Must close in UWM's name (not correspondent loans) ^[1]

Credit & DTI:

• Standalone Yellow: Min FICO 640, Max DTI 50%
• Standalone Pink: Min FICO 680, Max DTI 50%
• Piggyback Pink: Min FICO 680, Max DTI 50% ^[1]

Loan Amounts:

• Min line amount: $20,000-$25,000 (depending on product)
• Max loan amount: $350,000-$500,000 (depending on product)
• Max CLTV/HCLTV: 85%-90% (depending on product) ^[1]

State Restrictions: Not available in Texas, Vermont, and Iowa. Tennessee primary residences are ineligible. ^[1]

Questions I can help with:

1. What are the specific credit and income documentation requirements for HELOCs?
2. How do CLTV and HCLTV calculations work for HELOCs?
3. What are the state-specific fee restrictions for HELOCs?

UWM offers HELOC Standalone products (Home Equity Line of Credit), which come in two versions:

HELOC Standalone Pink (for loans locked on or after October 23, 2024) and
HELOC Standalone Yellow (for loans locked on or before July 17, 2025).
Both offer flexible terms: 20 or 30-year loans with 3 or 5-year draw periods, 10-year interest-only periods, and 10 or 20-year amortization options. ^{[2] [1]}

These are second lien products with minimum line amounts of $25,000 and maximum loan sizes up to $500,000 (Pink) or $350,000 (Yellow), depending on property type and credit profile.

HELOC – YELLOW

Please refer to the HELOC (Standalone) – Yellow matrix for a more detailed list of product parameters.

PARAMETERS

• 30-year Standalone
  • First 10 years = interest only payment
  • Year 11 – 30 = payment is amortized over 20 years

• 20-year Standalone
  • First 10 years = interest only payment
  • Years 11 – 20 = payment is amortized over 10 years

• 3-year or 5-year draw
• Primary, second home and investment properties – 1-4 units
  • 2-4 units are ineligible on second homes

• Max loan amount = $500,000
• Min line amount = $25,000
• Min initial draw amount = 75% of the line amount
  • Subject to a 90-day lock-out period after the initial draw at closing

• Max CLTV/HCLTV = 85%
• Min FICO = 640
• Max DTI = 50%
• 2^nd Lien Positions Only
  • 1^st lien can be any product type or channel
  • Standalone must be conventional or high balance

• Manual underwrite required
• Eligible for hybrid with eNote and Hybrid with Paper Note closings
• Temporary rate buydowns, manufactured homes and co-ops are not permitted
• Not available in Texas, Vermont and Iowa

APPRAISAL VALUATION REQUIREMENTS

Standalone Yellow HELOC require 2 appraisals.

IF THE TOTAL LINE AMOUNT IS LESS THAN OR EQUAL TO (<) $250K:

• An approved AVM, Broker Price Opinion (BPO), desktop appraisal, exterior-only appraisal or full appraisal is required as the first property valuation

IF THE TOTAL LINE AMOUNT IS GREATER THAN (>) $250K:

• A full appraisal is required as the first property valuation

NOTE: Appraisal re-use is permitted for appraisals dated within 12 months.

SECOND APPRAISAL OPTIONS:

• Acceptable CU/LCA score
• Automated Valuation Model (AVM)
• Broker Price Opinion (BPO)
• Collateral Desktop Analysis (CDA)
• Field Review
• Exterior-only appraisal
• Desktop appraisal
• Full appraisal

NOTE: Second Valuation cannot be more than 10% less than the primary valuation

CREDIT REQUIREMENTS

For HELOC Yellow loans, a tri-merge or a single bureau credit report is required for all borrowers. There cannot be a mix of tri-merge reports and single bureau reports if there are multiple borrowers on the loan. If a tri-merge credit report is already provided for the borrower, a single-bureau report cannot be obtained and provided for the loan.

• If tri-merge credit reports are provided for all borrowers, at least two credit scores are required per borrower. The lower of the two scores will be the qualifying FICO for the borrower.
• Single bureau hard credit reports are only accepted if provided from Experian. Single bureau hard credit reports from TransUnion and Equifax will NOT be accepted. Any prequalification/soft pull credit reports from any of the bureau's will also NOT be accepted.
   
  • The qualifying credit score for the loan must come from the primary wage earner
  • All borrowers must meet the minimum FICO requirement

HELOC – PINK 

Please refer to the HELOC (Standalone) – Pink and HELOC (Piggyback) – Pink matrix for a more detailed list of product parameters.

PARAMETERS

STANDALONE

• 30-year
  • First 10 years = interest only payment
  • Year 11 – 30 = payment is amortized over 20 years

• 20-year
  • First 10 years = interest only payment
  • Years 11 – 20 = payment is amortized over 10 years

• 3-year or 5-year draw
• Primary, second home and investment properties – 1-4 units
• Max loan amount = $500,000
• Min line amount = $25,000
• Min initial draw amount = 75% of the line amount
  • Subject to a 90-day lock-out period after the initial draw at closing

• Max CLTV/HCLTV = 90%
• Min FICO = 680
• Max DTI = 50%
• 2^nd Lien Positions Only
  • 1^st lien can be any product type or channel
  • Standalone must be conventional or high balance

• Manual underwrite required
• Temporary rate buydowns, manufactured homes and co-ops are not permitted
• Not available in Texas, Vermont and Iowa
• Mortgage payment history: zero 30-day lates allowed in the last 12 months

APPRAISAL VALUATION REQUIREMENTS

IF THE TOTAL LINE AMOUNT IS LESS THAN OR EQUAL TO (<) $400K:

• An approved AVM, exterior-only appraisal or full appraisal is required as the first property valuation

IF THE TOTAL LINE AMOUNT IS GREATER THAN (>) $400K:

• A full appraisal is required as the first property valuation

NOTE: Appraisal re-use is permitted for appraisals dated within 12 months.

PIGGYBACK

• 30-year
  • First 10-years = interest only payment
  • Year 11 – 30 = payment is amortized over 20 years

• 3-year or 5-year draw
• Primary, second home and investment properties – 1-4 units
• Max loan amount = $500,000
• Min line amount = $20,000
• Min initial draw amount = 75% of the line amount
  • Subject to a 90-day lock-out period after the initial draw at closing

• Max CLTV/HCLTV = 90%
• Min FICO = 680
• Max DTI = 50%*
  • *Subject to first lien restrictions

• 2^nd Lien Positions Only
  • Can only be paired with conventional loans
  • 1st lien can be correspondent, but Piggyback HELOC must be a broker loan

• Approve/Eligible or Accept/Eligible findings required on the primary loan
• No manual underwrite
• Non-occupant co-borrowers are permitted
• Temporary rate buydowns, manufactured homes and co-ops are not permitted
• Not available in Texas
• Mortgage payment history: zero 30-day lates allowed in the last 12 months

APPRAISAL VALUATION REQUIREMENTS

• A Property Condition Report is required when an AVM is being used
•  Appraisal waivers accepted with a supporting AVM on loan amounts less than or equal to $400,000 as the first property valuation

NOTE: Appraisal re-use is permitted for appraisals dated within 12 months.

CREDIT REQUIREMENTS

For Standalone HELOC Pink loans, a tri-merge credit report for all borrowers is required. At least two credit scores are required per borrower. The lower of the two scores will be the qualifying FICO for the borrower.

For Piggyback HELOC Pink loans, the underwriter will defer to the first lien AUS requirements regarding credit, but at least two credit scores are required per borrower. The lower of the two scores will be the qualifying FICO for the borrower.

PRODUCT COMPARISON

INCOME REQUIREMENTS

For both Standalone and Piggyback HELOCs, income produced, or in relation to, cannabis, hemp, or the adult entertainment industry are not permitted.

NOTE: For Standalone and Piggyback HELOCs, the Assets as Income variance is not permitted.

THIRD PARTY DOCUMENTATION

HOI REPLACEMENT COST

For both Standalone and Piggyback HELOCs, a Replacement Cost Estimator (or equivalent) is required from the insurance provider.

• HOI policy must provide a dollar value if the policy is not “Full” or “Guaranteed” replacement cost

TITLE REQUIREMENTS

• All borrowers must be vested on title at the time of the loan application
• HELOC must be in the second lien position
• Subordinate financing is not permitted
• Additional subordinate mortgage liens must be paid off and/or closed
• Title Insurance Policies on HELOCs MUST cover the total loan amount

NOTE: There are no title seasoning requirements.

PRODUCT COMPARISON

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