How to get a home equity loan

The combined challenges of high inflation and high interest rates are weighing on many Americans. Not only are the monthly costs higher, but the debt obligations can also be more expensive. If you have credit card debt, for example, high interest rates can make it more difficult to pay off your balance.

At the same time, real estate prices are also generally higher than pre-pandemic. Therefore, some homeowners may have enjoyed home equity gains, against which they could potentially borrow. could do so Help home owners Paying off high-interest loans or receiving cash for the like Home renovation or repair.

Extract a Home equity loan It shouldn’t be a snap decision, as you want to make sure you’re aware of the risks and comfortable taking on more debt. But the actual process of getting a home equity loan doesn’t have to be overly complicated.

If you think you could benefit from taking out a home equity loan, start exploring your options here.

How to get a home equity loan

To get a home equity loan, consider the following:

Review your home equity level

Before diving deeper into the process, consider what your home equity level currently looks like. Your home equity is equal to the appraised value of your home minus existing debt, such as your traditional mortgage. So, if the value of your home has gone up, your home equity has probably gone up a lot.

Costs for a home appraisal can vary but are usually in the ballpark of several hundred dollars. Before you get an official appraisal, though, you can look up current estimates for your home on real estate websites.

Generally, you can borrow up to 85% of your home’s value on a combined basis, meaning your existing mortgage and a home equity loan can add up to 85% of the appraised value. But that may vary with lenders and your circumstances.

If your current level doesn’t leave you with much to borrow, you can wait to take out a home equity loan until you’ve paid off more of your mortgage, for example. Or you can wait to see if your home’s value increases over time.

You can now easily check your home equity options here to see if it is worth it to you.

Check your credit score

Another important aspect of getting a home equity loan is a Good credit score. The minimum can vary by lender, but generally, you need at least a 680 FICO score, According to ExperianEspecially if you want a good interest rate.

You can find your credit score for free, although you’ll want to make sure you do it through a reputable provider. The Federal Trade Commission It is the only site authorized by law to provide free annual credit reports AnnualCreditReport.com.

If your score is lower than you expected, you can look at nearby resources How to Increase Your Credit Score Or talk to a trusted professional. In general, a higher credit score corresponds to a lower interest rate.

Compare lenders

Once you have a good idea of ​​how much equity you have and your credit score, you can start shopping around for different home equity lenders. Doing so may involve talking to your bank or other financial institution with which you have an existing relationship, and you can search online to compare lenders.

In many cases, you can write down some details about your home equity situation to get a quote without affecting your credit score, although you’ll probably want to clarify that the lender is doing a hard inquiry, which could lower your credit score a bit.

The good news, though, is that you can often shop multiple lenders and make multiple hard inquiries that count as just one inquiry for credit purposes. This is usually possible if inquiries occur within 14-45 days depending on the credit scoring model, As Equifax explains.

You can easily compare lenders here or through the table below.

Apply for a home equity loan

After you shop, you can choose a lender that feels best for you and apply for a home equity loan. You will probably need to provide various documents like your ID and income verification file. In general, the process will probably look familiar if you’ve already gone through the steps to get your first mortgage.

Even if it’s not too complicated, be sure to weigh your options carefully. If you decide to go ahead with a home equity loan, be sure to read the fine print so you’re not surprised by the terms of the loan. Taking on additional debt is a big responsibility, but for many homeowners, A home equity loan provides a convenient source of cash.