When you need a lump sum of money, you may decide to take out a home equity loan. Doing so involves using your home as collateral to borrow money. A home equity loan can help you with unexpected medical bills, emergency home repairs, or any other major expenses you can’t otherwise afford.
How long does it take to get a home equity loan? The process of applying for a home equity loan from start to finish takes at least 30 days and may take as long as two months. This post will discuss the definition of a home equity loan, the application process, and ways to improve your approval chances.
Champions Mortgage has a team of the best mortgage lenders in Houston to help you borrow the money you need at a low interest rate.
The time it takes to complete the application process and get a home equity loan depends on the lender you choose, as well as your personal finances and how long it takes to gather all the necessary information to submit your application. When you know a bit about the process, you can estimate how long the process will take.
What Is a Home Equity Loan?
A home equity loan is commonly known as a second mortgage. If approved, you borrow against your home. You receive the full sum from your lender at once and repay it (including interest) over several years.
You and your lender agree upon the repayment schedule during the application process.
Homeowners are typically approved for amounts totaling less than 80% of their home’s total equity. The amount you can apply to borrow depends on a few things:
- Your credit score
- Your current income
- The current value of your home
- The amount of equity available
The Home Equity Loan Application Process
How long does it take to get a home equity loan? Let’s walk through the loan process.
Shop for a Lender
Getting a quote from at least three lenders is a good idea, so you know you’re getting the best interest rate and repayment terms possible.
Have Your Home Appraised
Some lenders require a home appraisal to obtain an official document stating the value of your home. The appraisal helps the lender determine the interest rate on your home equity loan.
Wait for the Underwriter To Review Your Application
Mortgage underwriters review your loan application, including the home appraisal, and ultimately give final approval for a home equity loan. During this process, which typically takes over a week depending on your chosen lender, you may go through stages such as mortgage conditional approval, marking progress in the approval process.
Finalize Your Home Equity Loan
After approval, you will meet with your lender to sign the paperwork and complete the process. You may choose to cancel the loan during a three-day grace period. After the three days pass, you will receive the sum of your home equity loan.
Filling Out the Application
After choosing a lender, you must provide a lot of information so the underwriter has everything necessary to approve or deny the loan. If you already know the information they need, you can work on assembling it before meeting with the loan officer. The following are some of the things they may ask for:
- Basic information like your name, address, and social security number
- Proof of income, including W-2s from the two tax years prior
- Information about your home, including the address, type of home, and its age
- The estimated value of your home and how much you owe on your existing mortgage
- How much equity you would like to borrow against your home
Ways To Shorten Home Equity Loan Approval Time
The loan approval process can take a while, so what if you need access to the money as soon as possible?
One thing you can do is get preapproved for your home equity loan. Additionally, keeping good records so you can gather the necessary paperwork in a few days will cut back on the total application time.
When shopping for lenders, ask about their typical processing time. Some lenders accept digital valuations instead of requiring an in-person appraisal, which can shorten the approval time.
Increasing Your Chances of Approval
If you plan to apply for a home equity loan in the future, there are some things you can do now to increase your chances.
Credit Score
If you have a credit score below 620, a lender is less likely to approve the loan, or if they do, you may end up with a ridiculously high interest rate. Work on raising your credit score by paying credit cards on time and keeping your monthly credit card balances low. Hold off on opening new credit accounts because each hard pull hurts your credit score.
Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is a major factor in whether or not the lender approves you for a home equity loan. Your DTI ratio is how much gross income you have in relation to how much you spend paying down debt every month. Decreasing your DTI ratio makes you a more attractive candidate when the underwriter reviews your application.
Home Equity
The more home equity you have, the better candidate you are for a loan. Home improvements like renovating or installing updated appliances add value to your home and increase equity. Paying down your mortgage also contributes to accrued home equity over time.
Apply for a Home Equity Loan in Texas With Champions Mortgage
How long does it take to get a home equity loan? Every lender has a timeline for processing home equity loan applications, which typically takes at least 30 days. Assembling the necessary paperwork before you start the application process will help shorten the time it takes for approval.
Champions Mortgage offers a variety of lending services, including a mortgage calculator. To start the application process, fill out the online contact form or call 281-727-2500. We proudly serve homeowners all over the great state of Texas and look forward to leveraging our years of experience for you.
