How to Qualify for a Home Equity Loan
- 1). Figure out how much you can borrow. Lenders will usually allow you to borrow money if you have at least 20 percent equity in your home. This means you can borrow up to 80 percent of your home's value. If your home is worth about $150,000 and you still owe about $100,000 on your mortgage, your home equity is $50,000. Most lending agencies will only let you borrow a portion of that amount but others may let you borrow that amount plus more with the hopes that the market will increase and your home will be worth more.
- 2). Decide if getting a home equity loan is right for you. The downside to using the equity in your home is that if you miss a payment, the lender can foreclose on your home. Usually, it takes more than missing one payment but there is still that risk. However, getting a home equity loan is ideal if you want to pay off some bills or make home improvements or upgrades.
- 3). Choose the right company. This may be the most important decision you make. Most people will just go with the lender that their original mortgage is with. This is usually a smart idea unless you have done some research and find you can get a better deal somewhere else. Research various companies, their reputations and the interest rate they are offering before making your final decision.
- 4). Fill out the required paperwork. When applying for a home equity loan, the paperwork can be daunting but necessary. However, thanks to modern technology you can fill out the paperwork online in the comfort of your own home. Make sure you answer all questions honestly and correctly to ensure the best home equity loan for your needs and your budget.
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