By Rahul Jain 
Essentially, home equity is borrowing money against the value of your house. However, obtaining approval for a home equity loan isn’t an easy endeavor. Although home equity loans are pretty much similar to mortgages, you will be surprised to know that the rejection rate is way higher. In fact, nearly half of all home equity loan applications are rejected.
With that said, if you are considering accessing your home equity loan, you might want to follow the steps given below to increase your chances of approval.
The first step is to do your homework and be absolutely sure that you can apply for this loan. Typically, homeowners can access the loan if they have paid twenty percent equity. Some mortgage lenders are ready to offer a loan if you have a minimum of ten percent equity, too. The simple rule is that the more you own of your home equity, the higher your chances of accessing a home equity loan. Similarly, the longer you have been living in your property, the more your “borrowing power” will be.
To be absolutely sure about your potential eligibility for accessing a home equity loan, we recommend getting in touch with AmeriSave, which can help you make your equity count.
You should take your time and consult at least three home equity loan providers before choosing one. When it comes to loan providers, you can consult lending companies, credit unions, or banks. Each potential home equity loan provider will offer their respective interest rates and fees. You will realize that the lenders will vary in their potential fees and interest rates. A clear understanding of their fee structures and a comparison of them will help you make the right decision.
The next step is submitting the paperwork along with an application. However, the documents and application process depend on your chosen lender. For instance, you might be required to submit the application and relevant documents online. The entire process of application submission includes details of your property, your personal information, and, of course, the financial documents.
The lender will analyze your credit history to get a clear picture of your credit score and debt obligations.
This step is particularly crucial in the process of accessing your loan. At this stage, your potential lender will evaluate the following aspects:
- Your credit score
- Your home value
- Your existing assets
- Potential debts
- Your potential ability to repay the borrowed money
During the process of underwriting review, the potential lender will verify everything in the documents that you submitted. They might demand additional documentation.
The final step of this process is securing the approval. During this stage, you will receive an estimate of the loan that includes the terms and conditions along with the closing costs of your loan. Carefully scan the terms and conditions before signing the final paperwork. If necessary, you will be responsible for any upfront charges. You can access the funds within a few days after closing the loan.
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