| When you apply for a home equity loan, lenders | | | | (Debt-to-income ratio is a term used to describe how |
| consider your creditworthiness when deciding whether | | | | much of your monthly income goes towards paying |
| or not to extend a loan. Your creditworthiness is | | | | your mortgage, credit card debt, loan installments, and |
| assessed based on three things: credit history, income, | | | | other financial obligations, including the home equity loan |
| and loan-to-value ratio. | | | | for which you are applying.) Most lenders will want to |
| Credit History | | | | make sure that your total debt does not exceed 38 |
| As with any loan, your credit history will have a major | | | | percent of your monthly income. |
| effect on home equity loan availability and loan interest | | | | Loan-to-Value |
| rates. Fortunately, qualifying for financing on a home | | | | The loan-to-value ratio is the amount you owe on your |
| you already own is much easier than qualifying for a | | | | house versus the amount your house is worth. For |
| new home loan. If you have good credit, you should | | | | example, if your house is worth $100,000 and you still |
| have no trouble qualifying for a home equity loan. You | | | | owe $70,000, your loan-to-value ratio is 70 percent. |
| should also be able to obtain a relatively good rate. If | | | | When you get a home equity loan, the value of your |
| you have bad credit, you should still be able to obtain a | | | | home is re-assessed. The lender will add your current |
| home equity loan, but your rate will probably be a bit | | | | mortgage balance to the requested home equity loan |
| higher. Before applying for a home equity loan, take | | | | amount, and divide the sum by your home's current |
| time to pull your credit report. If possible, improve your | | | | value. The final amount is the new loan-to-value ratio. |
| credit rating by removing mistakes and old debt. | | | | Many lenders want to keep this amount below 80 |
| Income | | | | percent. However, some lenders are willing to loan you |
| Even though the equity that has built up in your home | | | | 100 percent of your home's value or more. Here is a |
| belongs to you, lenders will still want to make sure that | | | | list of recommended Home Equity Lenders online. It's |
| you can pay back any amount that you borrow. To | | | | important to use a reputable lender online to make |
| determine your ability to repay, lenders will assess your | | | | sure your personal information is secure. |
| monthly income and your total debt-to-income ratio. | | | | |