COVID-19 has drastically changed our lives in many ways — from jobs to finances — and now it’s impacting how to get a HELOC.
If you’re a homeowner looking for emergency funding, debt consolidation, or cash for home improvements, a home equity line of credit, or HELOC, may be a great option. But the opportunity to borrow against your equity may not last long as more banks and lenders are halting applications or changing qualifications due to the coronavirus pandemic.
We’ll look at why COVID-19 is impacting your access to a home equity line of credit and how to get a HELOC despite the pandemic.
In This Article
COVID-19’s Impact on HELOCs
COVID-19 has caused banks and lenders to tighten standards for HELOCs. Wells Fargo and JPMorgan Chase have halted HELOC applications altogether, while Bank of America increased its HELOC credit score requirement from 660 to 720. Financial institutions are nervous about lending to homeowners because of the high unemployment rate and job market uncertainty.
Since May 2020, several banks, including Wells Fargo and Chase have stopped accepting applications for HELOCs. Other lenders and lending platforms, like Prosper are still offering HELOCs. But because no one knows what next week or month will bring, now may be the best time to apply for a home equity line of credit while it’s still an option.
How to Get a HELOC
The first step in how to get a HELOC or home equity loan during COVID-19 is researching what you need to apply, which depends on the lender. Typically, it’s similar to applying for a traditional mortgage and, in some cases, the application process can be done online. Information you may need to provide in your application includes:
- Personal information (name, phone, email, social security number)
- A minimum of two years of residence history and documentation
- Employment and income history, including your most recent pay stubs and W2
- Your latest bank statements and investment accounts
- Financial records for your owned property
Like any loan or credit line you apply for, it’s important to shop around to find the best fit for your needs with home equity loans. In addition to finding the best rates and lowest fees, you’ll also want to ask about closing costs, financial flexibility and fixed-rate options for your HELOC.
Before applying, ask about any closing costs. Many times these fees can be paid in cash at closing or they can be added to your HELOC balance. If you do add to your HELOC balance, you’ll have to start paying on it within 30 days of closing, even if you don’t draw any money for other uses. Sometimes HELOC closing costs are waived, but there are usually conditions you have to meet. Be sure to ask your lender about those conditions.
You’ll want to find out how flexible the HELOC is before applying. Ask about interest-only payments and the ability to pay everything off early, as some lenders can charge you for doing so.
While many HELOC rates are variable, some lenders offer a fixed-rate option. Fixed-rate options allow you stability and peace-of-mind when it comes to the risk of rising interest rates. If you can lock in a lower rate when applying for a HELOC, a fixed option may be a good choice.
Access Your Home Equity
Now that you know more about how to get a HELOC during COVID-19, it’s important to make sure you have enough equity to apply. If you want to find out how much you may be able to get from a home equity line of credit, use a HELOC calculator.
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT.
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.
Eligibility for a HELOC up to $500,000 depends on the information provided in the HELOC application. Borrower must take an initial draw of $50,000 at closing. Subsequent draws are prohibited during the first 90 days following closing. After the first 90 days following closing, subsequent draws must be $1,000 or more (not applicable in Texas). Loans above $250,000 require an in-home appraisal. Loans above $250,000 require title insurance.
The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Spring EQ borrowers get their cash on average in 18 days. The time period calculation to get cash is based on the last 6 months of 2021 loan fundings, assumes the funds are wired, excludes weekends, and excludes the government-mandated 3-day right of rescission grace period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications.
Spring EQ cannot use a borrower’s home equity funds to pay (in part or in full) Spring EQ non-homestead debt at account opening. Minimum draw in Texas is $4,000. To access HELOC funds, borrower must request convenience checks.
Interest rates may be adjusted based on factors related to the applicant’s credit profile, income and debt ratios, the presence of existing liens against and the location of the subject property, the occupancy status of the subject property, as well as the initial draw amount taken at the time of closing. Speak to a Prosper Agent for details.
Qualified applicants may borrow up to 97.5% of their home’s value (not applicable in Texas). This does not apply to investment properties. For Texas HELOCs, qualified applicants may borrow up to 80% of their home’s value.
HELOCs through Prosper may not be available in all states. Please carefully review your HELOC credit agreement for more information.
All HELOCs are underwritten and issued by Spring EQ, LLC, an Equal Housing Lender. NMLS #1464945.
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