Important Steps To Getting A Home Equity Loan
Do you own a house that feels like it's falling apart? Have you been trying to set aside money for a renovation but emergency repairs keep chipping away at the budget? Older homes can feel like a money sink as more and more things need to be fixed. Unfortunately, for a variety of reasons, it can be difficult to gather the money that's needed to stop this drain and to get your home back into shape. If this sounds like you, then getting a home equity loan may be just what you need. But before you apply for a loan, there are some things you need to do:
Check your credit: A bank or other lending institution will want to know that you can repay the home equity loan that they give you. Part of this will be checking your credit. If your credit is in the 600 range or lower, you're unlikely to be approved for a home equity loan. But if you have good credit, then that's your first hurdle overcome. In the past, you had to rely on lenders to check your credit for you, which could be a waste of everyone's time. Now, there are a number of places that allow you to check your credit online, some of which are free and take almost no time at all.
Gather existing mortgage paperwork: Once you know that you meet minimum home equity loan requirements, you'll want to gather paperwork on your existing mortgage. Some lenders may not deem this necessary and may simply contact your current mortgage lender for you. However, it's a good idea to have all of this documentation ready so that you don't have to go searching for it if they want it as part of the approval or preapproval process.
Prepare income statements: If your household only has one income and one bank account, this task is going to be super simple for you. But if there are multiple jobs or a self-employed person in the home, then proving income can be a little more difficult. Make sure to have your tax returns for the past year or two available, as well as current bank statements. Your lender will want to confirm that you have income sufficient to cover the additional mortgage payments that you'll be required to pay on your loan. They may also want to see that you have a certain amount of money in your savings account so that they know that you have the discipline to stay within a budget instead of maxing out your credit cards or otherwise living outside of your means.