Getting a home equity loan is a popular option for financing significant expenses such as home renovation, higher studies, or debt consolidation. However, when you pay your debt off, you build equity in your home, and this is an excellent way to finance your home for renovation and increase its market value without touching your savings account.
But, before starting, you must be wondering how long it takes to get a home equity loan and the requirements of this process.
Take time to understand the home equity loan, its period, and the requirements you need to fulfill to reduce the maximum risks and access your funds as early as possible.
Let’s dig into everything and comprehend some factors which may slow down the process.
Process of Home Equity Loan
Before getting into everything about the home equity loan, first of all, you need to identify its overall process. Besides, it is an excellent suggestion to talk to your lender to get precise details about their specific application process. Below is a stepwise approach that is common amongst many creditors:
✦ Identify if you’re Qualified
Before applying for a home equity loan, you must make sure that you meet the criteria. However, these requirements vary as per different lenders. Usually, you need to follow specific requirements, which include:
|✦ Proof of your stable employment and fixed income in order to make your lender sure that your installment payments won’t be delayed.||✦ A minimum of 15 to 20% equity on your home means you should have paid at least 15-20% payment of your debt.|
|✦ The FICO score or credit score should be 620 or above. But it also differs from lender to lender.||✦ The debt-to-income ratio should be a maximum of 50% or below.|
✦ Pick your Lender
Once you understand that you meet all the criteria, it’s time to choose your lender. It is advised to consider multiple lenders and select one with the best offers for you. Although it’s great to find a good creditor at the first attempt, if you could not find one, continue to find one. You should spend a few weeks finding your lender because an ideal lender becomes very beneficial for you in the future.
✦ Apply for the Loan
Now that you have chosen the best lender for you, you can apply for a home equity loan. For this purpose, you need to submit an application along with various documents. Not only this, you would need to answer a few questions in the application, such as the information about your income, debt, and property etc.
If you believe that you do not have a particular document that is required, you can directly talk to your creditor, and he would provide you with the best solution. They can either help you discover how you can fulfill these requirements to find the documents.
✦ Comparison of Financial Profile
You are done with all the paperwork and all the evaluation is completed, the investor would compare your financial profile with the requirements of a home equity loan. This comparison will define if you get approved officially by investigating your credit score and debt history.
The final stage is the termination, in which, once you have met all the requirements and approved for this loan, the loan is finalized. This stage generally takes not more than a couple of weeks.
Time Duration for Home Equity Loan
Well, there could be no specific time duration to complete the process of home equity loan because all it depends on is upon the lender. However, it can be said that the home equity loan can typically take from a week to two to three months in some cases. Thus, once you have picked the right lender for you, you can ask all your queries regarding the total time duration and process requirements.
Factors that Affect Timelines
It is essential to bear in mind that these timelines can be modified as per some external factors which should not be ignored.
✦ Application and Documentations
In the home equity loan process, you need to submit a copy of evidence of your stable income, the tax bill of your property, and the statement of your existing debt. As discussed earlier, there is a possibility that you may lack some documents which are required in the process. Therefore, for this purpose, the method may delay.
✦ Home Evaluation
Your investor will evaluate the value of your house, and your creditor would generally help you with this. However, the evaluator may take more time in this process.
This is the stage that takes a long time because it needs an elaborated report and review of your financial status and property details. Your creditor would examine your debt-to-income ratio, your present property mortgage, and credit score during this procedure. While investigating all these factors, it may take more time.
Eventually, it is time to sign the documentation when it comes to the termination of the process. However, in the end, while delivering the final documents, you need to schedule an appointment with a lawyer; his availability may delay the process.
So that you have identified the entire process of a home equity loan and some of its stages may vary from lender to lender. Thus, there is no specific answer to the question, how long does it take to get a home equity loan? I have also discussed some factors which impact the time duration of the home equity loan process. Anyhow, talk to your lender first before initiating the process to reduce the substantial risks.