How To Get Home Equity Loan In 3 Steps

Three Steps to Getting a Home Loan Approval

If you are wondering how to apply for a home equity loan, you are in the right place. This guide guides you through the approval process step by step, including:

  1. Obtaining pre-approval from a lender
  2. Complete a complete application
  3. Ensuring final approval

Here’s what you need to know at each stage of the process.


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1. Obtain pre-approval from a lender

Mortgage pre-approval is the first step in the home buying process. It is basically a trial run that will tell you how likely you are to get mortgage approval and how much you can borrow.

When it comes to home hunting, your pre-approval letter is very important. The:

  1. It tells you how much you can afford to pay for your next home. So you only look at the houses that you can afford and you will not be disappointed if you find the perfect place and it turns out to be very expensive for you
  2. It makes sellers and dealers take you seriously. Most sellers will only consider one offer from a pre-approved buyer, especially in a competitive market.

You can also qualify if you want a quick estimate of your home purchase budget. The process is usually faster and easier than a pre-approval. But the default will not give you the power to make an offer in a home like a pre-approval will.

How to get pre-approval

Obtaining pre-approval is in itself a three-step process:

  1. Choose a lender: We can bring you in contact with some or you can choose your existing bank or a recommendation from a friend or family member. At this point, you are not committed and you will have the opportunity to compare later
  2. Fill out a pre-approval application: This can only take 10-20 minutes online. If your lender thinks that a different type of mortgage might be best for you, they may suggest that
  3. Document your identity, income and assets: Most lenders now allow you to upload your documents online for a quick pre-approval decision

If you meet the basic mortgage requirements, you will then receive your pre-approval letter. Today, some lenders can provide them in hours or minutes. You can show this letter to real estate agents and sellers as proof that you are a viable buyer.

For more details on each step, read How to Get a Home Loan Approval.

Can you get pre-approved more than once?

Pre-approval letters have expiration dates. And you may need to refresh your own several times during the home hunting process. Do not worry. lenders are used to it. But always keep your letter up to date. The last thing you want to do is find your perfect home, make an offer and then find out that your letter has expired.

Please note that these letters are linked to the current mortgage rate at the time of issue. If interest rates have generally risen since then, you may be able to borrow less. If they have fallen, you may be in line for a bigger mortgage. Call your lender to be informed.

2. Complete a complete application

Pre-approval means that your lender is willing, in principle, to lend you up to a certain amount of money. But after signing a home purchase agreement, you will need to complete a complete mortgage application on the property you are buying.

This is the time to compare the best mortgage lenders and interest rates. In other words, you need to apply to many lenders to find out who offers you the lowest mortgage rate and the best overall deal. Seriously, with your purchases, you could save thousands in just a few years.

If you stay with your approved lender, you will probably have to resubmit all or most of the documents you provided earlier just to make sure it has the latest information.

And, of course, if you change lender, you will have to provide the whole lot.

If you want your application to be approved quickly, gather all the documents you will need in advance. And scan them if you upload them or email them. Or make copies by posting them or leaving them at a branch. The sooner you send them, the sooner your mortgage can be approved.

Here is a checklist of everything you will need to get mortgage approval.

Home Buying Checklist with All the Documents Needed to Obtain a Mortgage Approval

3. Obtain final approval from the contractor

“Undertaking” is the final stage of the mortgage approval process. During the takeover, the lender makes a thorough examination of your credit, income, assets, debts and your future home. A specialist contractor combs the papers, checks for red flags and hidden dangers.

At this stage of the mortgage process, be as patient as possible and answer the contractor’s questions. The sooner you resolve issues, the sooner you can unsubscribe to close.

Many applications complete with minimal to no queries. But the more complicated your application, the more issues your insurer is likely to raise. This tends to happen to applicants who are self-employed, rely heavily on tips and bonuses, or have a problematic employment history.

Mortgage approval requirements

In conclusion, a mortgage lender wants to know that you can afford the monthly payments for your new home and that you are a responsible borrower who consistently pays his bills on time. To this end, the contractor will carefully consider four criteria:

  1. Credit rating and credit history: Generally you need a rating of 580-620 or higher and a clean credit history (no lost payments, foreclosures, bankruptcies, etc.)
  2. Payment in advance: Expect to need at least a 3% down payment, although a larger down payment may make it easier for you to qualify
  3. Existing monthly debts: Your debt burden, including new housing costs *, must be manageable. This includes things like car loans, student loans, childcare / alimony, and minimal credit card payments
  4. Employment and income history: Your lender will want to see at least a two-year history of stable income and employment

* Housing costs include monthly mortgage payments (principal and interest), property taxes and homeowners insurance, plus any home equity insurance and / or homeowners association fees.

Of course, your insurer will be interested in other things, such as the assets you have. But these four will be their main goal.

Sometimes being strong in one of these four can make up for the weakness of another. For example, having an unusually large down payment can give you a small margin for your credit score or existing debt. But many mortgage programs have set rules for what the lender can not bend.

For more information, see: Basic requirements for buying a home.

How to get a mortgage approval: FAQ

How do I get a mortgage loan approval fast?

Prepare all the documents you will need before applying and answering questions. Choose an end-to-end digital mortgage lender if you want faster approval or pre-approval.

What will prevent me from getting a mortgage approval?

The main obstacles to approving mortgages are the very low credit score, the very small down payment, the very high debt-to-income ratio or the unreliable employment history.

What should I bring to the bank for a mortgage?

You will need to bring a variety of financial documents to the bank for a mortgage, including W2 or 1099 from previous years, tax returns, receipts and bank transfers. The lender will also pull out your credit and verify your employment status. Most lenders have digital application portals nowadays where you can upload these documents digitally instead of transferring physical copies to an office.

What credit score do you need to qualify for a home?

FHA loans have the lowest rating limits: 580 with a 3.5 percent down payment or 500 with a 10 percent down payment. But you may be better off with a loan from Fannie Mae or Freddie Mac and their minimum score is 620.

Does a pre-approval hurt your credit?

There is a tough credit check during the pre-approval process, but this usually reduces your credit score by only five points or less. And do not worry about comparison markets. “Within a 45-day window, multiple homeowner credit scores are recorded in your credit report as a single survey,” says the Office of Consumer Financial Protection (CFPB).

Is mortgage pre-approval required?

Technically not. However, sellers and real estate agents are unlikely to take you seriously if you can not show a current letter of approval. If you are bidding on a home, the seller and his agent want to know that you are a serious buyer with financing that can afford the property.

Obtain a mortgage approval

If you’re serious about home hunting, it’s time to start the mortgage approval process. You will want to get pre-approval before submitting a bid for a home and then apply for full approval once you have entered into a purchase agreement.

Are you ready to get started?

The information contained on The Mortgage Reports is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its executives, parent or affiliates.

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