Home Equity Loan

Owning your own home is an important investment. With this investment comes various financial options. You can access what you’ve paid into your home and its value to make other current expenses easier to manage.

Home equity loans can be a great way to get the money you need for home improvements, debt consolidation, or other expenses. They’re typically offered at lower interest rates than other forms of consumer loans because they are secured by your home, just like your primary mortgage.

What is a Home Equity Loan?

You have a handful of options when choosing financing, whether you’re looking to cover expenses, pay down high-interest debt, pay student loans, or other needs.

This could include getting a personal loan or credit card, but these might not provide the most affordable terms. They often have high interest rates because they don’t allow you to offer any collateral to secure the loan. 

A home equity loan is a second mortgage on your home that uses your home’s equity as collateral. Equity is the difference between how much you owe on your home and its current market value. For example, if you have a $100,000 home with a $60,000 mortgage balance, you have $40,000 in home equity.

Home equity loans provide borrowers with a large, lump-sum payment that they pay back in fixed installments over a specific time period. Home equity loans come in two varieties: fixed-rate loans and home equity lines of credit (HELOCs). In a fixed-rate loan, the interest rate remains the same throughout the term of the loan.

A home equity loan can be a great way to access the equity you’ve built up in your home to use as cash, especially if you invest that cash in home renovations that increase the value of your home.

How to Get a Home Equity Loan

To learn whether a home equity loan is the best option for reaching your financial goals, connect with us. To get you started, we’ve outlined the steps and documentation needed to help you understand what it takes to get approved for a home equity loan.

The Financing Process

By sharing basic information about your current finances and interest in a home equity loan, we’ll work with you to pull your credit report and calculate how much you can potentially borrow, depending on the equity in your home, the home’s value, and whether you currently have a mortgage.

We’ll also discuss the terms you qualify for and your options, as well as request various documentation for the underwriting process to make sure the home equity loan begins on a solid foundation.

We’re with you through each step leading to closing, where you can begin to make the most of your home’s equity with the cash you receive.

Home Equity Loan Requirements to Meet

These are the common requirements often needed to qualify for a home equity loan. If you have questions about these requirements, we’re here to help.

• You’ll need to have a certain amount of equity already paid into your home. Your home equity is the difference between how much you’ve paid on your mortgage and your home’s market value. To qualify, you typically need to have at least 15-20% equity in your home.
• We’ll use the amount of equity you have to calculate your Loan-to-Value (LTV) ratio to see if you qualify. With high equity you may be able to borrow up to 85% of your home’s value, depending on how much you currently owe on your home.
• Credit score requirements vary. In most cases, a credit score of 620 or higher qualifies. 
• Through underwriting evaluation, you’ll need documentation of your Debt-to-Income (DTI) ratio, which shows how much of your monthly income goes to paying your current debts.
• You may also need to verify your employment history and that you receive consistent, ongoing income.
• Showing proof of reliable payment history on your current or past mortgage is also helpful in qualifying for a home equity loan.

Home Equity Loan FAQs

Making the most of your home and your financial goals makes a big impact on your life. It’s ok to have questions. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.