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Key Information Loan Officers Need to Know

HomeLight's Buy Before You Sell affects the incoming residence's mortgage in two ways — assets and liabilities.

Assets 

  • The final Buy Before You Sell Agreement will show the amount being wired to the title company (available Equity Unlock + 2nd lien payoffs)
  • The Equity Unlock loan note is used for proof of funds on the incoming residence's mortgage
  • The Loan Terms document is used in place of the Closing Disclosure, if needed

Liabilities 

  • Buy Before You Sell facilitates a fully executed purchase contract with no contingencies. It removes the current mortgage debt from the incoming residence's mortgage DTI.

How to set up the Equity Unlock loan in your LOS 

1. Set up the Equity Unlock loan as you would a bridge loan 
  • The loan has 0% interest, and $0 payment 
  • Total Equity Unlock = Proceeds (available Equity Unlock + 2nd lien payoffs) 
2. Add asset as funds from pending home sale 
  • The sale date is the incoming residence's closing date 
3. Exclude the mortgage payment debt 
  • When prompted to indicate why its being excluded, select 'Pending Sale'

FAQs

What if my clients needs to unlock more equity?

With Buy Before You Sell, HomeLight unlocks a portion of your borrower’s equity in their existing home to use on the purchase of their next home.

We know that, sometimes, your borrowers need just a bit more equity to make the deal work. Enter Equity Boost: a feature with Buy Before You Sell that’s designed to help borrowers reach their down payment goals or assist in listing preparations at no extra cost.

With Equity Boost, we’re able to unlock up to 90% CLTV* on the borrower’s existing home to use on the purchase of their next home in two ways: 

  1. HELOC on IR 
  2. Proof of assets

Your clients can choose to use one or both methods to unlock more equity for their transaction. 

* Dependent on borrower’s financial profile, equity position in departing residence, and based on loan officer’s incoming residence estimates on purchase price, down payment, and client income and liabilities; subject to change.

How does it work?

Boost your borrower’s equity with a HELOC on their new residence

HomeLight can advance additional equity through a no-draw HELOC on the borrower’s new residence. To access this, the borrower can prequalify for the no-draw HELOC with a limit matching the total additional equity based on incoming residence estimates on purchase price, down payment, and client income and liabilities. 

If the borrower’s departing residence sells at or above target, the HELOC is never drawn on and can be closed or maintained at the client’s discretion. 

If the home sells below target, any remaining balance is drawn on the HELOC in order to consummate the sale of the departing property by providing the client a 30-year term to repay the difference.

In order to prequalify your borrower, we require their 1003 or enter prequalification information manually for HomeLightHome Loans to assess eligibility. If eligible, HomeLight would ask for the purchase loan package (1003, 1008, Clear to Close documentation, and credit and income documents) for the final approval once the incoming residence goes under contract.

Once approved, we issue an updated Buy Before You Sell Agreement showing the increased equity available. 

Boost your borrower’s equity with assets

If your client needs more funds, we can unlock additional equity for them with proof of assets, such as: 

  • Savings account 
  • 401(k) 
  • IRA
  • Investment or brokerage account 
  • Gift funds

Please note that cryptocurrency, business assets, as well as any assets that are already allocated for purchase of the new home are not accepted. 

A minimum credit score of 620 is required for a client to be eligible:

  • Client has credit score of 620-679: 2x asset requirement 
  • Client has credit score of 680+: 1.5x asset requirement

For proof of assets, we’ll require documentation including the most recent statement for the account with 30 days of transaction history listed.

How to get the process started?

  1. Submit your client for Buy Before You Sell. Please note that a client needs to be approved for both the program and an initial Equity Unlock Amount prior to starting the application process for Equity Boost.
  2. Educate your client about Equity Boost. Talk to your client about the option to unlock more equity through Equity Boost, how the program works, and what documents they’ll need in order to be qualified for either or both options to unlock additional equity. 
  3. Submit your client’s documentation in the Lender Portal. For proof of assets, we’ll require documentation including the most recent statement for the account with 30 days of transaction history listed. For the HELOC, you can upload your client’s 1003 or enter pre-qualification information manually for HomeLight Home Loans to assess eligibility. If eligible, we’ll ask for the purchase loan package (1003, 1008, Clear to Close documentation, and credit and income documents) for the final approval once the incoming residence goes under contract.
  4. Review your borrower’s Equity Unlock Amount. If you and your borrower determine they need more equity for their transaction and they meet both the credit score and asset qualifications, that means they’re a great fit for Equity Boost! 
  5. Apply for Equity Boost. Reach out to your Lender Relationship Manager to get the Equity Boost process started. We’ll trigger an email to you requesting additional documents detailing your borrower’s assets you’d like to be considered. You’ll also be able to find a prompt to apply for Equity Boost in the Task section for that borrower in the HomeLight Lender Portal.
  6. Select the assets that will be used to back the Equity Boost. You can select all that apply. We’ll let you know which supporting documents are required for each asset.
  7. Upload supporting documents. Please note that each document must be the most recent statement for the account with 30 days of transaction history listed. You should include all pages for each document. 

Once your borrower is approved, we’ll issue an updated Buy Before You Sell Agreement showing the increased equity available thanks to Equity Boost.

For both methods, after the borrower’s departing residence sells, the sale proceeds pay off the equity unlock loan; if there’s a shortfall, the client covers the remaining balance with qualified assets and/or a draw on the new residence HELOC.

Equity Boost is available in all states where HomeLight Buy Before You Sell operates, with the exception of Texas. We are working to bring Equity Boost to Texas soon.

What if an underwriter requests the Closing Disclosure for the sale of the departing residence?

  • HomeLight cannot provide the final  Settlement Statement/Closing Disclosure for the departing residence sale until closer to the end of the 90- day selling period
  • The Settlement Statement/Closing Disclosure is not needed per FNMA/FHLMC agency guidelines

Where will the Equity Unlock funds be sent?

  • Your client's funds will be sent directly to the incoming residence's title

When will the Buy Before You Sell documents be available? 

  • Residential Purchase Agreement & Final Buy Before You Sell Agreement  
    • After the departing residence inspection & final approval 
  • Equity Unlock loan note 
    • After the departing residence inspection, final approval, Equity Unlock loan closes, and the notary sends the documents back to HomeLight

What does the incoming residence's title need to know? 

    • The Equity Unlock funds need to be wired directly to them 
    • The overage must be disbursed back to the borrower