Home equity lines of credit (HELOCs) are a popular product among homeowners — even those who have only owned their home for a relatively short period of time. A form of revolving credit that works much like a credit card, a HELOC can offer new homeowners lower average interest rates on a loan, as well as potential tax benefits.
If you are interested in opening a HELOC, the qualification process will closely resemble what you might have gone through in applying for a mortgage. However, even though you may have gone through that process recently, brushing up on the basic steps to qualifying for a HELOC will only help your bid.
Start by figuring out your home equity
The first step is calculating the amount of equity you hold in your home. This is equal to your home's value minus the remaining value of your mortgage. Generally, lenders will allow homeowners to access around 80% of their equity through a HELOC.
Debt-to-income ratio and credit score are widely used indicators of a borrower's history, so you can be sure those factors will come into play during HELOC qualification. If you haven't already, do an updated calculation of your DTI and get a free credit check. Making sure your personal finances are in order before applying for a HELOC can help set the stage.
In all, while the HELOC application process might feel familiar, there is no hurt in preparing beforehand.
To help with that, check out our infographic "Steps to Qualifying for a HELOC" or contact the experts at Comerica Bank today for more information.
