How to Get a HELOC in 4 Steps—HELOC Process Explained
If U need some extra funds for a home renovation or other large expenses, you may be considering a home equity line of credit (HELOC). HELOCs are great options to fund projects, consolidate debt, or secure an emergency fund.
But you might be wondering: What exactly is a HELOC? What is the HELOC process, from application to approval? And how do you get a HELOC?
UMe wants to work with U to make all your financial dreams a success—including those that involve a HELOC. So let’s take a look at the HELOC process and how you can get a HELOC today, if it’s right for U.
What Is a HELOC?
A HELOC is a line of revolving credit secured by your home. You can access funds at a low-interest rate, taking out money up to your total line of credit during a draw period (usually 10 years).
During the draw period, you can make withdrawals and only pay interest on the money you borrow. During the repayment period (usually another 20 years), you pay back any outstanding balance plus interest.
While the most common uses of a HELOC are home improvements, renovations, or other large expenses, you can use it for whatever you’d like!
Qualifying for a HELOC
At this point you might ask, “This all sounds good, but how do I qualify for a HELOC?” Don’t worry, we’ve got you covered!
Typically, to qualify for a HELOC, you will need to have:
- At least 15% to 20% equity built up in your home
- A good credit score
- Verifiable income
- A reasonable debt-to-income ratio, usually 43% or less
- A history of repaying your debts on time
Have questions about how to qualify? Just contact us today — we are always here to help!
How to Get a HELOC in 4 Steps
There are some standard steps you will need to follow during the HELOC process.
1. Check Your Credit Score
The first step in the HELOC process is to check your credit score. Taking the time to check your credit report before applying for a HELOC can help you secure the best possible interest rate.
Most HELOC lenders require a credit score of at least 680, but at UMe — we work with U. While a score of 680+ can get you a good rate, you can still get a HELOC with UMe with a credit rating that is lower than 680!
Your debt-to-income ratio, or DTI, is all of your monthly debt payments divided by your gross monthly income. As we stated earlier, a good practice is to keep your DTI at or below 43% to qualify for a HELOC.
If your credit score is not quite up to par, utilizing a HELOC is one way you can improve it. For instance, paying down your credit card debt with a HELOC can improve your credit capacity and lower your debt-to-income ratio, which is an important factor in determining your credit score and can lower it.
2. Shop Around for Low Rates
Next, it’s time to go shopping for the best interest rate. It is essential to do your due diligence and compare rates from various lenders.
But we know that a UMe HELOC is the best HELOC in Burbank! We have a lower-than-low 12-month 5.99% introductory rate and super-competitive rates for the duration of the loan that you’ll find hard to beat, plus we fund faster than most institutions! (More info on that below, so read on!)
3. Apply for a HELOC
Speak to a Personal Banker at UMe and we can help U get your finances in order and help select the HELOC that’s right for you. Then it’s time to start the application process.
The HELOC application process generally goes like this:
- Apply in person, online, or over the phone. Make sure you have all the necessary paperwork and information ready (mortgage statement, how much equity you own, two months of pay stubs, tax return, etc.).
- NOTE: How much equity you own in the home — a.k.a., your loan-to-value (LTV) ratio — is a calculation of what you owe on your mortgage compared to your home’s current value.
- Review loan terms and requirements, including the HELOC interest rate, total loan amount, draw period, and payment schedule.
- We’ll work with you to get your home appraised after the loan is approved. Since it’s used as collateral with a HELOC, your home will need to be appraised to determine how much it’s worth.
4. Underwriting and Closing
After your HELOC is approved, we will order an appraisal on your home and will go through an underwriting and closing process. During the closing, you will sign the paperwork and finalize your loan!
You should know that it can take two to six weeks (sometimes even longer) to complete the process . But here at UMe, we are proud to be one of the fastest HELOC processors in the Burbank area, often providing funds in just two to four weeks! If you need your HELOC quickly, rest assured that we can deliver for U!
When Is a HELOC a Good Idea?
A HELOC is a good option for a long-term project you want to finance at a low-interest rate. For instance, if you want to take advantage of the great Burbank weather and add a patio to your home but you need extra cash to pay for the supplies, a HELOC may be the right move.
By allowing you to tap into your home equity when you need it, a HELOC is a flexible means of borrowing what you need, when you need it. After all, during the draw period, you only pay interest on what you borrow!
You can use a HELOC for just about anything. Keep in mind, however, that a HELOC is secured by your home so make sure you can pay back any funds you borrow after the draw period.
How to Get a HELOC With UMe
Ready to go on a HELOC adventure? We’ll be right there with U every step of the way!
A UMe HELOC not only provides you with terrific rates and the most flexible way to tap into the equity in your home, but you’ll also have the benefit of working with a local supporter ready to help you every step of the way.
Our friendly financial experts at UMe are ready to offer you competitive financing options in Burbank. Get started today by learning more about the HELOC process at UMe.
Disclaimer: U matter to Me (all of us) at UMe — and that’s why we do our best to deliver helpful information on our blog. Please note the following: (1) UMe Credit Union works hard to make certain that the information we post here is as accurate as humanly possible. But as you know, information can change and evolve quickly. While we try to update the blog on a regular basis, the content of some older posts may not be correct or up-to-date. (2) Some destinations on the World Wide Web that we link you to will exist on external websites. UMe Credit Union does not officially endorse any connected sites, nor do/did we compensate or get compensated by any entities to be featured in our posts (unless otherwise noted). (3) Everyone’s situation is unique and we advise you to consult with our personal bankers or your finance, tax, or legal professional for advice individualized to you!
