Qualifying for a Home Equity Loan
Qualifying for a Home Equity Loan
Home Equity Loans (HELs) are those loans which are availed after providing your homes as collateral. A home equity line of credit (HELOCs) is a revolving credit line decided by the lender and is based on the equity of your home. In general, lenders need a minimum of 80% as loan-to-value ratio left after the home equity loan if the borrower needs to get approved for a loan. In other words, you have to be the owner of a minimum of 20% of your home before you can stand a chance to qualify for a home equity loan. In case you have a home worth $250,000, there is a need for at least 30% equity to be deemed eligible for a HELs or HELOCs of $25,000.
Getting a Home Equity Loan with Bad Credit
Most lenders have a requirement of good credit score for you to qualify for HELs and HELOCs. A minimum of 620 FICO is needed to qualify for HEL and sometimes something even higher is required for HELOCs.
Note that the HELs might still be available to those with a low credit score if they have good equity on their homes and a low debt-to-income ratio. In case you want to access HELs or HELOCs in the moderately distant future, make sure you start improving your credit score first.
