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washington home equity loan

Washington Home Equity Loan

Qualifying for a Washington home equity loan is much like qualifying for your initial home loan. The lenders will use three main items to determine if you qualify for a home equity loan mortgage:

Credit history

Income

Property

The Washington home equity loan lenders will review these items to try and determine your ability to repay the loan. Lenders do not want to take a property, they simply want the repayment of the loan in a timely fashion.

Your credit history - Your credit history will be reviewed by the lender by obtaining the credit reports and credit scores from all three major bureau's: Transunion, Experian, Equifax. Lenders will look at the last two years of your credit history. What they are looking for is a timely repayment of bills, with no late payments. They are also reviewing your credit report to verify that there is no negative items such as: Collection accounts, liens (state or federal tax liens), Judgments, bankruptcies, charge off.

If there are negative items on your credit, this does not automatically disqualify you from a home equity loan but it may have an impact on the interest rate you will be charge. You should also have a loan officer review your options with you. Aside than reviewing you overall credit profile, the lenders will also review your credit score.

Your credit score - Why do lenders look at your credit score? They do so because your credit score is a statistical analysis of your credit profile to determine the likelihood of your ability to repay the home equity loan on a timely basis. The higher the score, the more likely (statistically) you will pay the loan on time. The lower the score, the higher the risk for late payments (again, statistically).

Typically, you will need a credit score above 620 to qualify for a home equity loan. If you score is below that number, the loan may be considered a sub-prime loan due to the statistically higher risk of default. Lenders do have specific loan programs available for these types of loans. It is important that you do not disqualify yourself from being able to obtain a home equity loan, please be sure have a lender review your credit report with you to determine your credit qualifications.

Your income - Once your credit history has been reviewed, the lender will next look at income history for the last two years. They lender is looking for a stable or increasing income history for the last two years. If you income has been stable or increasing, they will next review your current income to calculate your income to debt ratio's. Your income to debt ratios will help the lender determine your ability to repay the home equity loan. Your income to debt ratio usually should not exceed 45 - 50%.

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