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Home Equity Loans
Equity Loan Info:
-Building Equity
-Equity
Loan/Line Types
-Approval
Criteria
-Equity
Loan or Line?
-HELOCs for Emergencies
-Home Improvement Loans
-Loans vs. Line of Credit
-Costs
of HELOC
-Downside of Equity Loans
-Calculating Equity
-Eligible
Tax Breaks
-Why
Use Equity?
Refinancing
Home Purchases
Mortgages
Auto Loans
Personal Loans
Debt Consolidation
Credit Reports
Credit Cards
Home
-Taxes
-Managing Money
-Credit Help
-Checking Accounts
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WHAT LENDERS LOOK FOR
Your
credit rating is going to determine whether or not you are
approved for a home equity loan as well as what kind of terms you
are offered, i.e. loan amount, rates, terms, etc.. Your credit
worthiness boils down to three key variables: your income, your
loan-to-value and your credit history.
Below is a breakdown of the different criteria
lenders use when deciding your credit worth.
Credit history
The amount of debt you encompass and all of your account
activity is collected by the three major credit bureaus. This
information is then accumulated in a profile called your
credit report. You are assigned a number between 300 and
850 based on your credit history. This number is called your FICO
score and is named after the Fair Isaac Corp., the company that
invented the credit scoring system.
Your credit report contains your identifying
information, including your name, address and Social Security
number. Also included is your credit history, such as when your
accounts were opened, how much you owe, your available limits, and
whether or not you pay your bills on time. In addition, public
records are also listed on your credit report, i.e. bankruptcies,
liens, foreclosures, repos, and/or legal judgments against you
(including child support or tax cases). Lastly, any type of recent
credit inquiry is going to be present.
It is wise to
obtain a copy of your credit report once a year so that you can
assure credit report accuracy.
You can obtain a
free credit report copy here.
Income
Potential lenders are going to want to know how long you have been
involved in your industry, how long you have been employed at your
current job and how much money you make. Your
debt-to-income is going to play a significant role.
Specifically, how much of your pay check goes towards your
credit card debt, mortgage, auto loan, etc., including the
equity debt you are applying for. Most lenders will consider
approvals for individuals that have a debt-to-income that is less
than 40%.
When applying for a home equity loan, you will have to provide proof
of income, specifically
W-2s, tax returns, etc.. These items are necessary for approval and
optimal interest rates. Keep in mind that you do not need this info
when applying for a free equity loan consultation with Star Loan
Services. However, we will need this info in order to finalize your
request.
Loan to value ratio, or LTV
This is the ratio between what your house is worth and what you
owe. For example, if your home is worth $200,000, but you still owe
$160,000, your loan-to-value is 80%, because $160,000 is 80% of
$200,000.
When you initially purchased your home, the LTV was easily
determined by dividing the mortgage amount by the price of the home.
However, when looking to utilize an equity product, things get a
little more confusing. This is because your home's worth has changed
since from when you first brought it. Lenders will
obtain an appraisal of what your home's current fair market value
is. (You can learn
how to fight the assessment of your home) Then, your current
mortgage balance will be added to the amount of equity loan you are
interested in. They will divide the total by the current value of
your home. This is how your LTV ratio is determined. There are
things you can do
build equity in your home.
Traditional lenders look to lend only 80% of the loan-to-value.
However, Star Loan Services offers
equity loans for up to 125% of your home's value. For example,
if your home is worth $200,000, and you owe $100,000, you can borrow
$150,000! Learn more about the
equity loans we offer.
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