![[4 Application Tips] What is needed for a Home Equity Loan?](../../hubfs/Home%20Equity/Smiling%20man%20talking%20on%20mobile%20phone%20in%20cafe.jpg)
Life has a lot of big moments, and unfortunately, they all cost equally big money -- your child's wedding, college tuition, or the need for a new car to replace the one that just wore out yesterday. Even the most fiscally responsible family needs help footing the big bills that life has a way of generating. That's why, at America's Credit Union, we're willing to work with you to find the best rates on home equity loans to get you through.
What is needed for a Home Equity Loan?
- A loan-to-value ratio large enough to cover the amount borrowed
- A favorable credit score
- A low debt-to-income ratio
All of these factors typically influence your loan, but at America's Credit Union, you're a valued member first and a credit score second. If you need a home equity loan, and you've had financial hiccups along the way, come see us anyway. Our friendly and experienced loan experts will work hard to help you find flexible repayment terms that work for you. We offer a low-fixed rate, low closing costs, no application fee, and no penalty if you pay your home equity loan off early.
1. Know Your Loan-to-Value Ratio
Your loan-to-value ratio, or LTV, is calculated simply by determining the current market value of your home (possible sources: county tax appraisal, realtor assessment, your own knowledge of sales in your area) and MULTIPLYING that market value by 80% (for Texas properties) then SUBTRACTING any existing liens against your property. For example: if your home is valued at $250,000, 80% of that amount would be $200,000. If you currently owe $100,000 on your home, then your current equity would be $100,000.
Remember.... the lender is required to get a certified appraisal from an approved appraiser during the application process. But, by using your knowledge of your own home’s value, you can usually come up with a good estimate.
2. Check Your Credit Score
Your credit score is an important indicator of how responsible you are when it comes to paying bills on time. The higher your credit score, the easier it becomes to open a home equity loan. But at America's Credit Union, we understand that sometimes things happen along the way. Contact us and let us help you explore all your options.
3. Pay Down Existing Debt
Carrying a high debt-to-income ratio makes it difficult to borrow money because it may look like you're in over your head financially, or that you're teetering on the brink of financial chaos. Before applying for a home equity loan, pay down revolving balances to free up credit. A good debt-to-income ratio to shoot for is around 40%.
4. Understand How Much Money You Need to Borrow
Borrow enough to account for often overlooked expenses to accomplish your goals for the loan. Little expenses can add up and become a hardship when you forget to plan for them.
Other tips to remember when applying for a home equity loan include deciding on the length of your loan, understanding how much you'll be required to repay and bringing proof of a solid work history. Also keep in mind that a home equity loan is only available on your primary residence, not a second home or rental home you may own. And, make sure to have your completed application on hand and all other required documentation; contact us at info@americascu.org and we can walk you through what you need to know.
Sources
https://www.bankrate.com/finance/home-equity/requirements-to-borrow-from-home-equity.aspx
http://www.americascu.org/home/lending/realestate/equityloans
https://smartasset.com/credit-cards/what-is-a-good-debt-to-income-ratio
