Have you heard a homeowner talk about how to get a HELOC to fund home improvements or put toward other major expenses? You may be curious about how to get a home equity line of credit or a home equity loan. 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.
Eligibility for a home equity loan or HELOC up to the maximum amount shown depends on the information provided in the home equity application. Depending on the lender, loans above $250,000 may require an in-home appraisal and title insurance. Depending on the lender, HELOC borrowers must take an initial draw of $50,000 at closing; subsequent HELOC draws are prohibited during the first 90 days following closing; after the first 90 days following closing, subsequent HELOC draws must be $1,000, or more, except in Texas, where the minimum subsequent draw amount is $4,000.
The amount of time it takes to get funds varies. It is measured from the time the lender receives all documents requested from the applicant and depends on the time it takes to verify information provided in the application. The time period calculation to get funds is based on the first 4 months of 2023 loan fundings, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period.
For Texas home equity products through Prosper, funds cannot be used to pay (in part or in full) non-homestead debt at account opening.
Depending on the lender, qualified home equity applicants may borrow up to 80% – 95% of their primary home’s value and up to 80% – 90% of the value of a second home. In Texas, qualified applicants may borrow up to 80% of their home’s value. HELoan applicants may borrow up to 85% of the value of an investment property (not available for HELOCs).
Home equity products through Prosper may not be available in all states.
All home equity products are underwritten and issued by Prosper’s Lending Partners. Please see your agreement for details.
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