Image by jacobgrier via Flickr

If you moved or are moving to the Dallas-Fort Worth metroplex from outside of Texas, there are a number of things to get used to when you first arrive. You may hear people refer to general groups as “y’all” and specific individuals within a group as “all y’all.” You’ll occasionally see police officers patrol on horseback, though not as often as television and print ads would have people in other states believe.

And if you’re familiar with the home equity lending process in your former state, you’re in for major differences that may frustrate you, even though lawmakers wrote them to afford maximum consumer protections to you.

Texas Home Equity Lending History

A home equity loan is a way for homeowners to leverage the accumulated value in their largest asset – their home – in order to secure low interest loans for higher amounts than they could otherwise qualify. Although these loans have been in most states for decades, Dallas homeowners did not have access to home equity loans until 1997. Before then, you could only take out a home equity loan on a second home or a rental property in Texas. Your primary residence was strictly off the table. The home equity line of credit (HELOC) was not available until several years later.

Texas Home Equity Laws

Before you seriously consider using the equity in your home to secure a loan, it’s important to understand in what instances Dallas homeowners can qualify for a home equity loan on their primary residence. Texas home equity law stipulates that:

• The total of your home equity loan plus your existing liens (1st mortgage) cannot exceed 80 percent of the fair market value of your home.
• The property does NOT have agriculture exemption on it.
• You may NEVER have more than one home equity loan at a time on the same property. (Home improvement loans are not always the same thing.)
• You must allow your current home equity loan to season for a period of 12 months before renewing it or applying for a new loan if paid it off early. No exceptions.
• Your lender must provide you certain disclosures at the time of application and may not close your loan before expiration of a 12-day cooling off period, allowing you ample time to reconsider your decision.
• Your lender may not fund your loan after closing until expiration of the 3-day recission period. This period does not begin until you sign and date the form spelling out your recission options. (Sometimes called “Right of Recission.”)