Get Your Home Equity Loan Approved Quicker: Easy Tips to Follow
When you're in the market for a home equity loan, you may have concerns about whether or not your application will be approved. Fortunately, there are several things you can do to help improve your chances of getting the green light from your lender.
Here are a few tips to help get your home equity loan approved quicker.
Check Your Credit Score and Fix Any Errors
A credit score is a number that lenders use to determine your creditworthiness. In other words, it's a way of measuring how likely you are to repay a loan on time.
Checking your credit score will give you an idea of where you stand and whether there are any errors you need to fix. Anything from an incorrect credit limit to a late payment that you actually made on time can show up on your report.
Such errors can lower your score and make you appear to be a riskier borrower, even when you're not. If you find any errors, dispute them with the credit bureau. This can take some time, so it's best to start early.
A higher credit score will improve your chances of getting approved for a home equity loan. Generally speaking, you'll need a score of at least 620 to qualify for most loans.
If your score is on the lower end, there are still options available to you. Oftentimes, you may just have to pay a higher interest rate.
Know How Much Equity You Have in Your Home
Your home equity is the portion of your home's value that you actually own. In other words, it's the appraised value of your home minus any outstanding debts, such as your mortgage.
For example, if your home value is $300,000 and you have a mortgage balance of $150,000, you have about $150,000 in equity.
The amount of equity you have will determine how much money you can borrow. So, in the example above, you could potentially qualify for a loan of up to $105,000. The actual amount you get will also depend on factors like your credit score and income.
If you don't have a lot of equity in your home, you may still be able to get a home equity loan. Most lenders offer a home equity line of credit (HELOC). This is a revolving line of credit that you can tap into as needed, similar to a credit card. The amount you're approved for will depend on the same factors as a home equity loan, such as your credit score and home value.
Keep in mind that a HELOC typically has a variable interest rate, which means your monthly payments could go up or down over time. For more info, reach out to a service such as LincOne Federal Credit Union.