Determine the equity you have in your home.
Take the current market value of your house and subtract your remaining mortgage payments. The difference represents the equity you’ve built up in your home. Even if the home isn’t entirely yours yet, the portion of it you do own can be used as collateral on a home equity loan.
This type of loan is an option for homeowners faced with large expenses such as household improvements and repairs, college tuition, or medical bills. Home equity is the largest source of net worth for most of us, so borrowing against it represents a major decision.
What You Need to Qualify For a Home Equity Loan
- A Good Credit Score
You’ll want a score of around 720, depending on the credit bureau doing the ranking. Some factors used in determining your score include how much of your available credit card limits you’re using and how reliably you pay down the balances. Other factors include the length of time your accounts have been open, your total number of credit accounts, and the number of times financial institutions have checked your credit report. Dings on your credit history (known as derogatory marks) lower your credit score and include bankruptcy, foreclosure, and bills in collections. Why it Matters: A good credit score doesn’t just determine whether you’ll get the loan, but how high an interest rate you’ll be charged.
- Low Loan-to-Value Ratio (LTV)
LTV is the ratio of your first mortgage lien to the total appraised value of your home. This is similar to a combined loan-to-value ratio where banks factor first and second loans against the appraised value of your home. Why it Matters: The higher your LTV ratio, the greater the risk for the lender. A high LTV may mean higher interest rates or a denial of your loan application.
What is the difference between a home equity loan and a home equity line of credit?
A home equity loan can help you meet large expenses, including home repairs.
Home Equity Loans from The First
Whether you need ready funds for home improvements, education, a vacation, or a new vehicle, The First offers competitive rates and exceptional customer service. Call us today at 215-860-9100 or check our loan terms and rates Here.