Pennymac Home Equity Loan Review 2024 - NerdWallet (2024)

FAQs

What credit score do you need for a HELOC in 2024? ›

The credit reporting agency Experian says borrowers typically need a credit score of 680 to qualify for a home equity line of credit.

Depending on the Fed's policy, where interest rates are heading and the nature of your financial need, one may be more ideal than the other. HELOCs benefit most from rate decreases. With the Fed looking to lower rates later in 2024, a HELOC may be more beneficial than a home equity loan because the rate could go down.

Pennymac excels in government-backed mortgages, including FHA loans, and makes it easy to shop for customized mortgage rates online. But average origination fees are higher than most lenders', and it does not offer home equity lines of credit.

High debt levels

In addition to your credit score, lenders evaluate your debt-to-income (DTI) ratio when applying for a home equity loan. If you already have a lot of outstanding debt compared to your income level, taking on a new monthly home equity loan payment may be too much based on the lender's criteria.

Loan payment example: on a $50,000 loan for 120 months at 7.65% interest rate, monthly payments would be $597.43. Payment example does not include amounts for taxes and insurance premiums.

You should expect to meet the following HELOC loan requirements: Minimum 620 credit score. You'll need a minimum 620 score, though the most competitive rates typically go to borrowers with 780 scores or higher. Debt-to-income (DTI) ratio under 43%.

While they're not as popular as they were a year ago, the loans may still be a smart option for some homeowners in need of cash (especially with the average homeowner now sitting on about $300,000 in equity, according to recent data).

Negotiate the terms and fees

Don't be afraid to negotiate with lenders. While low interest rates are an important factor, be sure to also pay attention to the terms and fees associated with the HELOC.

Inflation and Fed hikes have pushed mortgage rates up to a 20-year high. 30-year mortgage rates are currently expected to fall to between 6.5% and 7% in 2024. Homebuyers might consider buying now and refinancing later to avoid increased competition when rates drop.

PennyMac Financial Services has paid $158.4 million to Black Knight Servicing Technologies, concluding a five-year legal battle over allegations of trade secret theft involving two of the biggest companies in the housing industry. An arbitrator issued the final award on Jan.

What credit score does PennyMac use? ›

Underwriting mortgages is an essential part of the overall home loan process and generally takes about 30–60 days, depending on the type of loan, lender and current volume of borrowers.

Despite their advantages, home equity loans come with risks: You could lose your home if you miss payments, owe more than your home's worth, and your credit score could suffer.

When a home equity loan doesn't make sense. No matter how important some purchases seem, using your home as collateral to pay for nonessential expenses isn't a good idea. A one-time expense, such as a wedding or vacation, isn't optimal for a home equity loan.

HELOCs and home equity loans are the most common way to tap home equity, but they are hard to get, and nearly half of homeowners fail to qualify. The denial rates for HELOCs are 46%, compared to 12% for a conventional mortgage.

If you have bad credit, which generally means a score less than 580, you probably won't qualify for a home equity loan. Many lenders require a minimum credit score of 620 to qualify for a home equity loan. However, to receive good terms, you should aim to have a credit score of 700 or higher.

How to qualify for a HELOC with Figure. You need a credit score of at least 640 to be eligible for a HELOC from Figure (or at least 680 if you're tying the line of credit to an investment property or second home). If you have a higher credit score, you'll have access to a larger line.

The requirements for a HELOC are straightforward but can be stringent. In most cases, you'll need to have a significant chunk of equity in your home — at least 15% to 20% or more, according to our research. You'll also likely need to have a solid credit history. If your credit is poor, you may not qualify.

If you have anything between 620 and 700, you may be able to qualify. With a credit score lower than 600 can be more difficult to secure a HELOC, but not impossible (read our tips below to improve your qualifications in light of bad credit). Other requirements will also need to be met in order to qualify.