Self-employed homeowners often face challenges accessing the equity in their homes. Traditional home equity lines of credit (HELOCs) frequently rely on tax returns to determine income eligibility, which can create problems for borrowers whose reported net income appears lower due to legitimate business deductions. Fortunately, modern Digital HELOC programs offer financing solutions that allow borrowers to qualify using alternative documentation, such as bank statements, rather than tax returns. In this case study, we show how a borrower unlocked significant equity in their home through a First Lien Digital HELOC.
The Borrower Scenario
Our borrower owned their primary residence free and clear, giving them substantial equity in the property. They wanted to access that equity to remodel their home, specifically updating their kitchen and bathrooms. Beyond the renovation project, the borrower also wanted a home equity line of credit, which would allow them to draw additional funds in the future if needed. However, there was one challenge. Although the borrower had an excellent FICO score of 739 and had been self-employed for over 20 years, their tax returns showed significant business deductions. This resulted in a debt-to-income ratio of 57%, which would typically exceed the limits of most conventional HELOC programs.
The Non-QM Digital HELOC Solution
Instead of relying on tax returns, the borrower qualified using 12 months of bank statements through a Non-QM Digital HELOC program. Bank statement programs are for self-employed borrowers whose true income may not be accurately reflected on tax returns due to deductions. By analyzing the borrower’s bank deposits rather than their net taxable income, we were able to determine a more accurate representation of the borrower’s ability to repay the loan. As a result, the borrower successfully secured a $260,000 home equity line of credit.
Digital HELOC Program Highlights
The First Lien Digital HELOC program used in this scenario offers several attractive features:
Loan Amounts: $50,000 – $400,000
Minimum FICO Requirements
- Primary Residence: 660
- Second Home: 660
- Investment Property: 700
Maximum CLTV
- Primary Residence: 90%
- Second Home: 85%
- Investment Property: 75%
Debt-to-Income Ratio: Up to 50%
Property Valuation: AVM (Automated Valuation Model) allowed in many cases. These guidelines make digital HELOCs an appealing option for homeowners seeking access to their equity. If you’re interested in learning more about Digital HELOCs, contact us to discuss your scenario.
