Reader Question: Can I Get a Home Equity Loan?
One of the questions that I have been asked a lot lately is this one:
How likely am I to get a home equity loan?
As with most personal finance questions, it really does depend on your personal situation. And what a mortgage lender is willing to for you (which is increasingly less and less). But there are ways to get a shrewd idea of how likely you are to get approved for a home equity loan.
Mortgage lenders are wary of giving out risky loans again. Gone are the days when you could get a second home mortgage for 90% of your home’s equity. Some mortgage lenders, believing that the real estate market would just continue appreciating at a rapid rate, were offering home equity loan options that amounted to 125% of a home’s available equity.
New expectations for home equity loans
Mortgage lenders now expect a little more in terms of the people they lend money to now. Bad credit home equity loans are becoming scarcer as mortgage lenders want borrowers with less risky credit scores. Many lenders want a credit score of at least 650 (which is lower than what many mortgage lenders will accept for a first home mortgage loan).
Additionally, many mortgage lenders want to make sure there is plenty of equity in the home. With home values dropping, lenders want to make sure that the homes used for collateral aren’t going to suddenly take a nose dive and be worth less than you owe on the home.
Finally, mortgage lenders are becoming more prone to verify income. Many mortgage lenders, who used to fudge income numbers in the past, as well as let some documentation slide, are tightening up requirements.
So, if you have plenty of equity in your home, and if you have sufficient income and good credit, you are likely to get a home equity loan.
Tags: home equity loan, home equity, home mortgage loan, home equity second mortgage,
second mortgage, home values, reader question
