Considering taking out a second mortgage? You have options! One of them is taking out a home equity line of credit, or HELOC. What is a HELOC, and how does it work? How long does it take to get a HELOC? What steps and tasks are necessary? We’re here to answer all your questions. Find everything you need to know about this home loan option by reading below.
How do I know if I qualify for a HELOC?
Before even beginning the application process, check that you meet the basic requirements to be approved for a HELOC. These include:
- Debt-to-income ratio that is below 40% to 50%
- Credit score of at least 620, but this exact number varies by lender and could be 660 or more
- Enough equity built up to actually borrow from, typically at least 15% to 20%
If you don’t meet these requirements, it will take a little longer to get a HELOC, but it will be worth it. You can reach these standards in a quicker way by paying off your debts and avoiding opening any new ones.
Of course, the exact parameters will vary by lender, but once you know you meet them, you’re ready to officially start the HELOC approval process.
How do I start the process to get a HELOC?
First, you’ll want to learn all you can about HELOCs and how they work. At Solarity, we offer resources and guides to help you do so. You can also contact one of our Home Loan Guides for a consultation.
The main thing to note ahead of time is that a HELOC is a different financial option than a cash-out refinance. With a HELOC, instead of receiving one lump sum, you open a line of credit to borrow against as you need. It shares similarities with a credit card, but the interest rates are typically better, and a HELOC can be more manageable in general.
Once you’re positive this is the best option, the process starts with filling out an application to see if you qualify to get a HELOC. Many credit unions, including Solarity, have online applications. You can have the extra convenience of filling it out in the comfort of your own home.
After completing the application, how long does it take to get a HELOC?
In general, it will take two to six weeks after submitting your application to get a HELOC. But that varies by lender. Some can process applications quicker than others.
Here at Solarity, most of our members will usually get approved for HELOCs within two weeks. Sometimes, it doesn’t take long at all, and members get a HELOC within a day.
What can I do to help expedite the process?
To approve a HELOC, your lender will need some important information about you and your financial situation. Lenders often have the paperwork requirements listed on their websites. Typically, in addition to your application, you’ll need to include the following items:
- Proof of income, such as a pay stub, W2 and/or your tax returns
- Bank and investment statements
- Home appraisal
- Proof of homeowner’s insurance
- Your most recent mortgage statement
Once the credit union has this information and your application, they’ll work on getting you approved as soon as possible.
At Solarity, this includes our team communicating with you. This is to be sure you’re making the right decision and borrowing the right amount.
How much does it cost to get a HELOC?
Exact closing costs will vary, but you shouldn’t expect to pay more than $900. The fees involved to get a HELOC include the following:
- Application fee
- Appraisal fee
- Attorney and notary fee
- Credit report fee
- Title search fee
Be careful and borrow from a lender you trust. This can help you avoid any hidden fees.
How long does the HELOC work once I have it?
Once you get a HELOC, you’ll start with a 10-year-long draw period. After that period ends, you transition into a 15-year repayment period. Throughout the life of a HELOC, your interest rates will likely be more manageable than other financial products, such as credit cards. And you have a higher credit limit than what you generally get with credit cards.
Once I get a HELOC, what can I use it for?
There are actually no set rules for how you spend your line of credit. But some options are more common than others. Many people put that money back into their homes. This can include getting some long-needed repairs done, buying a second home or investment property or completing some long-planned renovations.
But the funds you get from your home equity don’t have to be used for something home related. Others use this money to fund education, start a business, pay off existing debts and more. The possibilities are endless.
No matter what you choose, make sure to keep up your monthly interest payments. Remember, your home itself is being used as the collateral for this loan. You don’t want to risk losing it.
Now that you know how long it takes to get a HELOC, we hope you feel excited by the quick turnaround as well as the possibilities it brings. For more information, you can find out everything you need to know about Solarity Credit Union’s HELOC options online. And don’t hesitate to apply conveniently on our website as soon as you’re ready. If you have any more questions or concerns, you can also speak with one of our Home Loan Guides. We’re always looking out for our members. We want you to succeed with all your financial goals.