Have you heard a homeowner talk about how to get a HELOC to fund home improvements or put toward other major expenses? You probably have–HELOCs are popular borrowing options for homeowners. A HELOC is shorthand for a home equity line of credit, and it operates much like a credit card. A lender approves you to borrow up to a certain amount based primarily on your home equity and credit profile. As long as you pay back what you use, you can draw from that pool of funds again and again.
The amount you can borrow through a HELOC will depend on the amount of equity you’ve built in your home. You can usually get approved for up to 80% of the value of your home, minus the balance that you owe on your mortgage.
A HELOC usually has lower interest rates than other options like personal loans or credit cards. This makes it an appealing option for borrowers who need to fund home renovations, cover unexpected expenses, or pay for big purchases.
In This Article
How to Get a HELOC
If you’re looking at how to get a HELOC, your first step should be to take a look at your qualifications. What will lenders see when they look at your financial profile?
Qualifications for HELOC borrowers
Before a lender approves you for a HELOC, they’ll want to know that you can afford to pay it back. One of the key factors they’ll consider is your credit score, a three-digit number between 300-850 that serves as a major factor for evaluating your financial health. The higher the number, the more responsible a borrower you are considered to be.
Credit Score Expectations
Naturally, the stronger your credit score is, the more likely you are to be approved for a home equity line of credit and to secure a lower interest rate. A good credit score is typically considered to be a score of over 700. However, it’s still possible to get a HELOC with a range of credit scores–just talk to your lender about your options and keep in mind that you will likely be charged a higher interest rate if your credit score is lower.
Most lenders will offer a HELOC that is 80% of your home’s value minus the amount you owe on your mortgage. So, for example, if your home is valued at $100,000 and you owe $25,000 on your mortgage, then you may be able to access a HELOC that is $80,000-$25,000 = $55,000
Once you have an idea of how much you can qualify to receive as a credit limit, start shopping around for approximate rates and compare the terms that lenders offer.
Not all lenders will be able or willing to give you an estimated borrowing total or interest rate before you file a formal application. Unfortunately, formal HELOC applications usually involve hard credit checks, and multiple applications for credit lines can hurt your credit score.
To protect your credit, start by looking at lenders that will give you a quote without conducting a hard credit check. Prosper, for example, can give you a personalized offer instantly with no impact on your credit score.
How to Get a HELOC: The Application
When you choose a lender and file an application, you’ll have to submit basic personal and financial data. This may include:
- Contact information including your physical address
- Two years or more of income documentation
- Two months or more of bank and investment statements
- Documentation of financial events such as divorce
- Financial records for your owned property
- The appraised value of your home
You don’t have to submit all of this at once, but you should plan to have it on hand for when your lender requests it.
Be aware that while Prosper offers a simple, online application, many lenders have a more complicated application process—for which you should allow extra time. After calculating your personalized offer, Prosper directs you to a simple online application. It takes just minutes to complete, and you can get your credit line in a matter of weeks.
- A HELOC lets you borrow against the equity in your home.
- If you have strong credit and equity in your home, you may be approved to borrow up 80% of your home’s value minus whatever you still owe on your mortgage.
- To apply for a HELOC, you’ll need to submit basic financial documentation including income information and information about your property
- The HELOC application process can be complicated, but Prosper makes it easy by letting you apply online.
If you’re interested in learning more about a HELOC through Prosper, visit www.prosper.com/heloc to learn more. Remember, Prosper is unique in that there’s no hard credit pull required to check your rates and get your personalized offer.
All HELOCs are underwritten and issued by BBVA USA. BBVA and BBVA Compass are trade names of BBVA USA, a member of the BBVA Group. BBVA USA, Member FDIC, and an Equal Housing Lender. NMLS #402936
Prosper Marketplace, Inc. NMLS#111473 (http://www.nmlsconsumeraccess.org)
California – licensed by the California Department of Real Estate – Real Estate Broker – DRE License Number #02087958
Arizona – Arizona Mortgage Banker License No. BK-0949818
In Colorado, regulated by the Division of Real Estate, License #111473
Texas – SML Mortgage Company License #111473
Texas office address: 6860 North Dallas Parkway, Suite 200 Plano, TX 75024