How Long Does It Take to Get a Home Equity Loan?
Home equity loans allow you to convert your equity into cash. You could borrow up to 85 percent of your home value minus the outstanding mortgage amount. But there are qualification criteria you must meet to qualify for funding.
This guide explores the timeline for home equity loan processing and factors that can cause funding delays. It also features Unlock, a debt-free alternative that lets you tap into your built-up equity and could be a better fit for your financial situation.
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How Long Does It Typically Take to Get a Home Equity Loan?
The process can take anywhere from a few weeks to four months. It depends on the lender’s current workload and delays that could surface during the review, underwriting, and closing process.
What Can Affect Approval Time for a Home Equity Loan?
Lenders work diligently to process loan applications, but approval and funding delays are possible for many reasons. Below are issues that sometimes arise with home equity loan applications:
The lender will check your credit score when you apply and before the loan closes. Suppose your score drops during this period, or you add additional debt to your plate. In that case, the lender could delay or deny your application.
If you fail to submit the requested documentation promptly, the processing of your application could be delayed. So, it’s important to upload all the necessary documents when you apply and swiftly respond to the underwriter’s requests during the review process.
The underwriter reviews your financial and property information to ensure you meet the home equity loan criteria. If there are discrepancies between what the lender finds and the information in your application, approval times could be affected.
Home Valuation Factors
Lenders coordinate with homeowners to have the home evaluated. This requirement could slow up the process if the appraiser is booked and won’t be available when needed.
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The Typical Process of Getting a Home Equity Loan
Before you apply for a home equity loan or home equity line of credit (HELOC), it’s essential to familiarize yourself with the process.
1. Review the Common Requirements for a Home Equity Loan
Traditional lenders, credit unions, and online lenders have specific guidelines for home equity loans. However, you generally want to have a credit score of at least 620, a debt-to-income ratio (DTI) that doesn’t exceed 43 percent, and 15 to 20 percent in equity. You should also have a steady, verifiable source of income. (Quick note: some lenders accept homeowners with DTI ratios of up to 50 percent).
The lender will likely require an appraisal to determine your home value and potential loan amount. Most extend home equity loans between 80 and 85 percent of your home’s value minus the amount owed on your mortgage. For example, if your home is worth $485,000 and you owe $365,000, you could qualify for up to $47,250 ($485,000 * .85 – $365,000).
2. Find a Lender
Not all lenders are the same, so you want to shop around to find a good match. Many offer prequalification tools you can use to view potential loan offers and terms without impacting your credit score.
You should also ask the lenders what documents you’ll need to apply for a home equity loan during your search. This could expedite the review process and get you to the closing table faster.
3. Apply for the Loan
Select a lender from your list of options and complete the application in its entirety. Review for accuracy and be sure to upload any supporting documents required by the lender.
4. Complete a Property Evaluation
The next step is to get an official property evaluation. Lenders will generally coordinate with you to get this done, but know that it should be completed by a licensed appraiser.
5. Underwriting Phase
Once the appraisal is finished, the underwriter handling your file will review the figures along with your credit history and financial information to determine if you qualify for a home equity loan.
6. Closing Phase
During this step, you will review the closing paperwork and sign on the dotted line. Once the loan closes, funds will be disbursed to your account in a lump sum.
Access your Home Equity Faster with a Home Equity Agreement
Home equity loans work for some homeowners but not others. If you can’t get approved for a home equity loan or want to access your home equity faster, a Home Equity Agreement (HEA) could be an alternative way to get equity out of your home.
What is a Home Equity Agreement?
A Home Equity Agreement (HEA) can get you cash for the equity in your home, and you won’t have to take out a loan. Instead, you’ll receive cash today in exchange for a share of your home’s future change in value. You can use the cash for whatever you want, such as home improvements or paying off debt.
How Long the Process Usually Takes?
You could complete the process and get approved for home equity investment in as little as 30 days. However, delays could extend the closing date.
Where Can You Apply for a Home Equity Agreement?
Unlock is a Home Equity Agreement provider. You could get up to $500,000 in cash without meeting strict income requirements. Even better, there are no monthly payments for the duration of the agreement.
You’ll retain ownership of your home, and there are no monthly payments or income requirements. Plus, the funds are yours to use however you see fit.
Here’s how it works:
- Step 1: Enter information about your home into the online form.
- Step 2: Review your potential offer.
- Step 3: Speak with a team member to discuss the next steps.
- Step 4: Coordinate with Unlock to get your home appraised.
- Step 5: Review and sign the closing documents.
- Step 6: Get your cash.
When the agreement ends, or you sell your home, Unlock will receive their original investment and share of the increase in value as indicated in the contract.
To qualify for an investment with Unlock, you should meet these criteria:
- Own a piece of residential real estate; (both owner-occupied and non-owner occupied properties potentially qualify for an investment)
- Have a minimum credit score of at least 550
- Have at least 20 percent in equity built up in your home
Get started today by submitting an online inquiry or scheduling a meeting with a member of the Unlock team.