Introduction
To apply and qualify for a home equity line of credit you must first understand the basics of what it is and how to get it. A home equity line of credit is basically borrowing money or taking out a loan on the equity which you have already put in the home. For instance if you bought a home for $100K and you have paid down the principal to $50K, but the value of the house is at $75K then the bank would most likely only lend $25K on the loan.
Step 1
Applying for a home equity line of credit can be difficult or very easy depending on how much you know about the process and who to go to for the paperwork. In the following steps you will see how filing with the right company and knowing the process can make it a lot easier. The first thing you would want to do is to find out which type of loan you want to apply for. Once you know what type of loan you feel is going to be best then you can find a bank that you feel would be best for your situation. Not all banks do all types of loans, so finding a bank that does offer the loan that you are interested in would be best. Your loan officer will be able to offer you some suggestions as well as a check off list of documents that you will need to get. This is the first step in obtaining the home equity line of credit.
Step 2
The next thing to do and is probably one of the most important things in the lone process is getting the house inspected and appraised by a trusted professional. The loan company may or may not require you to use one of their referrals or one of their contractors. This may hurt or help you in the loan process. If you are not sure about the estimate or think it is wrong get a second opinion from another professional. The home equity line of credit is something very big and it could make a difference with the appraisal and what you can get.
Step 3
The next step would be to turn in all the paperwork and documents to your loan officer. Once the documents are turned in the next thing would be for the loan officer to check your credit. Before the credit check it would be a good idea to make sure there are no mistakes and everything is correct. This could hurt your chances or prevent you from getting the home equity line of credit that you are looking for. If there are mistakes or something that prevents you from getting the loan fixing the mistakes and reapplying is always an option, but there could be a 6 month waiting preiod to reapply for another home equity line of credit.
Step 4
The next thing is to wait to hear back from your loan officer. He or she will tell you what the final decision was. The whole process once the paperwork is filed and turned in could take a few days up to 30 days for a decision. Once a decision is made you will have to either sign something stating you agree to the initial agreement and set up a closing date, or decline and try to go with another finance company.
Step 5
Once you get the approval you can schedule and set up a closing date. The closing date is the day that you will close on the home equity line of credit. This is where you will sign all the paperwork and documents finalizing the close of the sale. On the closing date most finance companies will also issue the check by certified check or direct deposit. In many instances it is best to do it by direct deposit since most banks will put a hold on large checks.
Tips
Some things to know before trying to go further in the process or begin the process is:
- Get copies of your credit report and fix the mistakes prior.
- You must be making steady payments on your mortgage for at least a year or more.
- You can not have any late payments for the past year that could effect your credit report.
- Be sure that you have enough equity in your home before trying to get a home equity line of credit.
- The minimum most finance companies will do is $10,000, if you have less than this you should wait longer.
- Make copies of everything and keep them.
- Make notes and get everything in writing. If a finance company says they can do something for you over another get it in writing therefore it will stand up in court if needed.
