How does a home equity loan work?

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How does a home equity loan work?

The requirements can vary depending on the lender and your individual financial situation. However, when applying for a home equity loan, lenders will look for:

• Sufficient equity: Lenders typically require that you own at least 20% to 25% equity in your home.

• Good credit score: In most cases, the minimum credit score requirement is 620, but 680 is favorable among lenders.

• Stable income: You'll need proof of employment or income, such as pay stubs, W-2 forms, or tax returns.

• Debt-to-income ratio (DTI): DTI is the percentage of your income that goes toward debt payments. Requirements vary from lender to lender, but most have a maximum threshold of around 43%.

What can you use a home equity loan for?

There are no restrictions on leveraging your home equity loan funds. You can finance various goals, such as:

• Debt consolidation

• Renovating your home

• Buying a second home

• Covering medical expenses

• Boosting your retirement savings

• Making aging-in-place home upgrades

• Funding an investment or business venture

• Paying for IVF or adoption

• Covering other major purchases or recurring bills

How does a home equity loan work?

Key Mortgage Metrics

Research and compare different types of mortgages, such as fixed-rate, adjustable-rate, FHA, VA, or conventional loans, to find the best option for your needs and financial situation.

Key Mortgage Metrics

Research and compare different types of mortgages, such as fixed-rate, adjustable-rate, FHA, VA, or conventional loans, to find the best option for your needs and financial situation.