How Can I Qualify for A Home Equity Loan?
Image Image courtesy of Stuart Miles at FreeDigitalPhotos.net

How Can I Qualify for A Home Equity Loan?

Most financial institutions will let you borrow as much as 70%-80% of the loan-to-value (LTV) ratio of your home less any outstanding mortgage debt on your property.

Most financial institutions will let you borrow as much as 70%-80% of the loan-to-value (LTV) ratio of your home less any outstanding mortgage debt on your property. There are a variety of home equity loan products available, each with their own terms and conditions. The equity is collateral you can use when borrowing against your home and is calculated as follows:

How Much Credit is Available to You
Calculations Purchase
Appraised value of your home $300,000
Borrowing percentage* 80%
Percentage of appraised value $240,000
Less existing mortgage debt -$100,000
Potential credit line $140,000

* Actual percentages may vary depending on the lender and borrowed amount.

When determining your available credit line, the lender may take into consideration other factors including your past credit history, your current income, and your ability to repay a loan. After your credit history has been evaluated, a report will be generated which includes your credit score and lets lenders know which loan is best suited for you.

Maintaining a good FICO score

Your credit score is calculated by the Fair Isaac Corporation (FICO), which accesses the three main credit reporting bureaus (Equifax, TransUnion, and Experian). Credit scores can range from as low as 300 points to as high as 850. People with average credit usually score around 620, good credit at 660, and excellent credit above 720.

You can build and maintain a good credit score by always paying your bills on time, and by keeping a good utilization ratio. This means using less credit than is actually available to you. FICO scores are based on your rating in five general categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and types of credit used (10%) (Source: www.myfico.com). Whether you are new to using credit, or have been a long-time borrower, keeping these categories in mind and maintaining responsible borrowing habits can help you strengthen your credit score. Compare home equity rates.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to bank transparency and the climate crisis. Since co-founding BestCashCow in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

Your code to embed this article on your website* :

*You are allowed to change only styles on the code of this iframe.

Add your Comment

or use your BestCashCow account

or

Featured - Home Equity Line Of Credit Rates 2024

Lender APR (%)? Monthly Payment? Learn More
Third Federal Savings and Loan
Third Federal Savings and Loan
7.490 %
$0 Learn More
More Info
New American Funding, LLC
New American Funding, LLC
0.000 %
$0 Learn More
More Info
CrossCountry Mortgage, LLC
CrossCountry Mortgage, LLC
0.000 %
$0 Learn More
More Info
AmeriSave Mortgage Corporation
AmeriSave Mortgage Corporation
0.000 %
$0 Learn More
More Info
Figure Home Equity Line
Figure Home Equity Line
0.000 %
$0 Learn More
More Info