Home Equity Loans: The New Fairy Godmother

Spring has come and gone and this is the summer you’ve been waiting for. The scent of flowers in full bloom, and the aroma of fresh cut grass fills the neighborhood. This morning you woke up to the promise of warmer days ahead. You hurry to open your windows and feel the fresh air across your face. You take a moment to breathe it in before the kids wake up. When you open your eyes, you realize that winter has left your carpets a mess, the kitchen faucet is still dripping, and your walls could use a fresh coat of paint. What you need is a magic wand or a Fairy Godmother, but sadly this is not a fairy tale so a home equity loan will have to do. But, what is a home equity loan and how could it possibly take the place of a Fairy Godmother?

A home equity loan is a great way to make updates to your home, pay for medical bills, or even remaining debt. With home equity loans, the homeowner uses the equity of their home as collateral. With your help, our lending experts make the process simple. There are several items they take into consideration when approving your loan. The more organized you are, the quicker the process will go.

Here are several steps that can help the process go smoothly:

1. Check your credit reports. US citizens are entitled to a yearly free credit report. This step is important because the better your credit, the better rate you will receive.
2. Determine how much equity you have in your home. For a standard home equity loan, a lender will typically use an equity factor of 80% (often referred to as the loan-to-value or LTV).  In figuring your LTV, take 80% of your home’s estimated fair market value, then subtract the balance that you owe on your current 1^st mortgage.  The result will be the amount of true equity you have available to borrow
3. Gather any paystubs from the past 30 to 60 days as well as W2’s from the past two years.
4. Collect documents pertaining to assets you may have.
5. You will need documents pertaining to the property such as your homeowner’s insurance declarations page, and the last appraisal of your home. It is important to know how much your home is worth as most financial institutions will only finance at an 80% or less loan to value ratio.

So, it might not be a Fairy Godmother or a magic wand, but a home equity loan will do. And, you can spruce up your home without taking a chunk out of your savings. For more information on Home equity loans, schedule a meeting with one of our personal bankers to find the right loan for you. 

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