Editor's choice: SoFi(NMLS #1121636)
- Prequalify without affecting your credit score
- Home equity funding with as few as 4 documents needed
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Be ready to submit copies of your current mortgage paperwork, proof of income and details about your credit history with your home equity loan preapproval application. You’ll need at least 15% home equity and a minimum credit score of 620 to qualify.
Getting preapproved is not the same as getting approved for a home loan. You can expect to submit some documentation, but it should take less time than the actual loan process. In general, you should expect to:
Lenders ask questions about your income, credit and ability to pay back loans, and other topics including:
Filling out a preapproval application can take a few minutes. Once you submit your application, a lender pulls your credit score and verifies your information. You should hear back within three business days.
Your preapproval letter is generally valid for 60 to 90 days. Contact your lender to get a precise timeline about when your preapproval expires.
If your lender rejects your preapproval application, you have the right to ask why. If your credit score is the issue, take some time to pay off your credit card balances.
If your debt-to-income (DTI) ratio is too high, you should try to pay off some debts. Or if your loan-to-value ratio is the problem, you’ll need to wait a bit longer to build some more equity.
Shop around to apply with another lender with more flexible underwriting requirements. Although some lenders may do a hard pull on your credit, you can protect your credit score by applying to multiple lenders within a 45-day time period.
Another option is to do a cash-out refinance. You can borrow more than your existing mortgage to turn some of your equity into cash. It’s important to note that a cash-out refinance replaces your current home loan and may have higher interest rates than what you’re currently paying.
Preapproval is a way to compare loan terms and lender fees. It also gives you a better idea of what to expect when you apply for the home equity loan. Compare lenders to find the best option when you want to tap into your equity.
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