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What You Should Know About Home Equity Loans
Author David Schneider | Aug 29,2007
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Home equity loans are a type of second mortgage that you can take out. The value of your loan is based on how much your home is worth and how much you still owe on it. Home equity loans come in several varieties including home equity lines of credit and fixed payment home equity loans. The proceeds from your home equity loan can be used for just about anything from paying off your credit cards to paying for a wedding.
How to Qualify
To qualify for a home equity loan you have to meet basic requirements. First of all, you have to own a house. This house can be your primary residence, a vacation home or an income property. Next, you have to have equity built up in your favor. Finally, you need to meet minimum credit requirements. The credit requirements for a home equity loan are slightly less strict than those held by a first mortgage because you have an established record of making mortgage payments and you will be paying a higher interest rate to cover the increased risk to the lender.
What Terms Are Available
The terms that you receive on your home equity loan can be modified to fit your preferences. You can select from term lengths between five years and 30 years. However, your term choices may be limited based on how much you want to borrow, your credit rating and on which home equity loan you select. For example, a home equity line of credit usually limits its terms to 10 years. However, you do have the option of renewing your HELOC for another 10 years at the end of your first term.
The Application Process
It is in your best interest to apply for a home equity loan online. By applying online, you will speed up your approval process. To start the application process find a lender you want to work with and fill out their online application form. This form will gather information on you, your house and your income. Some online applications will allow you to be approved in a matter of seconds. If this happens, your information will need to be verified before your official approval will be established.
Once your application has been reviewed and processed, you will either be asked to get your home appraised or the mortgage company will use an automated appraisal system to assign a value to your home. If your home qualifies for an automated appraisal and if you have good credit, then you can expect to close on your loan in as little as 10 business days. However, most applicants have to wait between 20 and 25 business days for their loans to close.
Fees
Just like any other type of mortgage, home equity loans have fees associated with them. However, the fees charged on your home equity loan are going to depend on who your lender is. Some lenders don't charge any fees, while others charge fees that are normally associated with mortgages like application fees, escrow fees, attorney fees, recording fees and lender fees. |
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