How to Access Equity in Your Home

Step-by-Step Guide

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   Step 1: Access your credit report to determine whether you need to make changes or improvements prior to attempting to access your home's equity.

   You can get one free credit report from every year from Equifax, Experian, and Transunion.
   
   If there are issues or errors, it will generally take about 2-3 months to make contact with the sources of any discrepancies and either remove or correct the errors.
   
   Disputes must be investigated within 30 days, but errors are not always resolved on the first try.
   
   Disputes must be removed before applying for a loan, and they do not go away automatically.
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   Step 2: It's always best to consult with a loan officer before paying off any collections or charge offs.

   Even if these accounts need to be paid before closing, it is best to arrange to pay them through escrow.
   
   Paying old debts before applying for a loan makes the accounts "active" again, and can potentially decrease your credit score.
   
   Old debts have less influence on your credit score than newer debts and delinquencies. ,,,, The current market value minus your mortgage debt equals the amount of your home equity. ,, Cash out refinances typically need to have an LTV of 85% or less.
   
   Don't forget to include closing costs in the total loan amount, unless you will bring cash to closing.
   
   If you will be taking a home equity loan or line of credit instead of refinancing the entire mortgage, there will be two loans and this ratio will be called the "Combined Loan to Value" or CLTV. ,, Discuss options with your loan officer and apply for the type of loan that is best for your current financial situation.
   
   The three methods for accessing equity are: refinancing your existing mortgage and taking cash out, applying for a home equity loan, or opening a line of credit based on equity. ,,,, Funds are accessed as needed, and the balance is paid monthly.
   
   This option is best suited for those with long-term projects or other expenses that will evolve over time. , Be aware that they cannot give you an accurate quote without pulling your credit report, and a fairly accurate estimate of your home value. ,, Take into consideration the loan officer's level of customer service and speed in processing your loan when making your decision.
   
   If you take more than one day to shop lenders, the rates will be changing on a daily basis, and sometimes more than once per day, so while one lender may seem less expensive, it may be due to rates declining. , They should have already collected the majority of your paperwork when determining whether or not you qualify. , Discuss locking your interest rate with your loan officer.
   
   Review all disclosures and submit additional paperwork as requested as soon as possible to keep your file moving forward.
   
   Your loan is not officially approved until it funds, so stay on top of any requests!
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   Step 3: Compile a thorough list of all debts

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   Step 4: such as credit cards and car loans

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   Step 5: as well as any debt to be incurred

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   Step 6: such as funds needed for home improvements or college tuition.

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   Step 7: Add all of the debts into one lump sum.

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   Step 8: This is the amount of "cash out" you will need.

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   Step 9: Ask your loan officer for an estimate of your home's current market value.

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    Step 10: Refer to your most recent loan statement and add the balance of your mortgage to the amount you wish to borrow.

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    Step 11: Divide this total by the value of your home to determine your Loan to Value Ratio (LTV).

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    Step 12: The CLTV may vary slightly from lender to lender

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    Step 13: but often needs to be lower than 80%.

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    Step 14: Consider your options for accessing home equity.

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    Step 15: Base your decision on the interest rate of the refinancing option

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    Step 16: as well as total monthly payments.

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    Step 17: If it is more than 1% lower than your existing loan

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    Step 18: this is probably the best choice.

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    Step 19: Choose the home equity loan if you're seeking a smaller amount of funds.

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    Step 20: Consider a line of credit

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    Step 21: based on your equity

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    Step 22: which works much like a credit card.

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    Step 23: Request quotes from several competing banks.

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    Step 24: Compare the loan options regarding: amount of payment

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    Step 25: length of loan

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    Step 26: interest rates

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    Step 27: and any additional fees.

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    Step 28: Decide which loan is best suited for your needs and your budget.

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    Step 29: Inform the bank you have chosen that you'd like to move forward with your application.

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    Step 30: Complete and sign the application

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    Step 31: attach the necessary updated paperwork

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    Step 32: and return it.

Detailed Guide

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