Home Equity Loan Requirements in 2021 best home equity loans

HELOC stands for home equity line of credit, or simply "home equity line." It is a loan set up as a line of credit for some maximum draw, rather than for a fixed dollar amount.

Tapping into home equity can be a smart way to borrow cash to pay for home improvements, pay off high-interest debt or fund other large expenses. If you have a significant amount of equity in your home, either because you have paid down your mortgage or because the market value of your home has increased substantially above the balance you owe on the property, you may be able to obtain a sizable loan.

The requirements to borrow from home equity vary by lender, but generally you will want to have a strong credit score, sufficient income, few debts, and a reliable payment history.

Home equity loans and HELOCs have their own set of pros and cons, so it is important to consider your needs and how each option would fit your budget and lifestyle. Regardless of which type of loan you choose, home equity loan requirements and HELOC requirements are typically the same. 

Requirements maybe include:

· Have at least 15 to 20 percent equity in your home. Having sufficient equity is key, since it determines how much you can borrow. It also protects you from going underwater on your mortgage.

· Have a credit score in the mid-600s. Many lenders set specific credit score requirements but having a higher score will also net you lower rates.

· Have a debt-to-income ratio of 43 percent or lower. Typically, lenders favor borrowers who have little debt relative to their income. To lenders, this is an indication of low risk.

· Have sufficient income. Lenders may scrutinize your income to make sure you will be able to repay the loan. A higher income can also give you a better debt-to-income ratio.

Have a reliable payment history. You can improve your approval odds and loan terms by maintaining a record of paying your bills on time. A pattern of timely payments will show the lender that you are a low-risk borrower.