When considering the factors that influence the approval of a home equity loan, and for any loan actually, the number one thing that your financial institution will consider is your creditworthiness, i.e., can you pay back the loan.
These are the Five Factors That Will Influence Your Home Equity Approval.
- Income and employer
- Mortgage obligation
- Assets – what you have
- Liabilities – what you owe
- Credit history
Take a look at each of these factors. You will find you most likely have this information available; it just might not be as organized or as easy to reach as you’d like, but you can do this. Also note that your lender may require other documentation. Be prepared.
Your income and employment are major factors that will influence your ability to get a home equity approval. You will want to show how long you have been employed and how much money you bring into your household. This information definitely tells your lender if you can pay back your home equity loan over time.
If you are self-employed, be prepared to offer different information. Most of the time, lenders want to see your personal and business tax returns and usually the last two years. They will also want to see a profit and loss statement.
Whether self-employed or not, you can also include child support or alimony payments as additional income if this applies to you.
Your current mortgage will also provide critical information – and again a major influence of your ability to get approved for a home equity loan. Also, depending on where you have your first mortgage and how old your mortgage is will depend on the information needed. You can apply for a home equity at a different financial institution than where you have your first mortgage because these are two separate mortgages – a primary and a secondary.
It’s a good time to look at all your assets. Gathering your bank statements is your first task for accumulating asset information. Then you’ll want to have records of all other assets such as your retirement accounts, stocks and bonds and any other real estate you might hold. You can see how all this starts to tie into your ability to show your lender you can pay back your loan over time.
Now that you have shown your lender what you have, you’ll also need to show your lender your liabilities – what you owe. In most cases, your liabilities will include any other loans you have, credit card debt and any other payments you make on a monthly basis. Therefore, if you pay child support or alimony, you will need to make sure to show these payments as a liability.
In the end, your credit report will tell your lender the most about you – do you have a reputation for paying your bills. Based on your credit report will your lender determine that you can pay back the loan? Oftentimes, there can be issues on a credit report perhaps from college days or misunderstood medical bills. It’s always a good idea to review your credit report so you can clear up any issue that is bringing your credit score down.
An advantage of getting all your financials together is that it really does give you an opportunity to organize your financial life. It’s always a benefit to have this part of your life in some sort of order in case you need to access these documents for other situations that might occur. Might be a nice time to set up some files. Just saying…
All this seems like a lot of information. And you may not need all of this documentation. However, keep in mind you want to give your lender a clear view of your financial life. These factors will certainly influence your approval of a home equity loan. As long as you can provide this information on your financials, you will give your lender the number one thing they are looking for when applying for a home equity loan – your ability to pay back the loan.
For more information on a HELOC please call Chelsea State Bank at 734.475.4210 or visit us at https://www.chelseastate.bank/landing/home-equity-loans/ to begin. We are here to help you.
Loans are subject to credit review and approval.
