How To Get Approved For Home Improvement Loans
If you want to fix up your home but you do not have the money to do so, then you can take out a home improvement loan. Home improvement loans can be used to upgrade an area in your home. You can also use a loan to improve landscaping or add onto your home. It is fairly esay to get a home improvement loan. However, you will have to meet certain criteria.
Know Your Project
Lenders will want to know why you need the loan. They will also want to have an estimate of how much money you will need. You will need to talk to material suppliers, contractors and service providers before you apply for a loan. If you have an accurate estimate for your project, then you will be much more likely to get approved.
Banks look favorably at people who have a good cost estimate and know exactly what they will need the money for. It shows them that they have done their homework.
Have Enough Equity
Equity is the what your home is worth minus your current loan balance. Home equity is one of the reasons that it is relatively easy to get a home improvement loan. Lenders are less likely to approve people who have less than 20 percent in home equity. If you have not reached this yet, then you will need to focus on reducing your mortgage balance. You may want to consider making extra monthly payments.
Be Financially Stable
Even if you have adequate equity, you will still have to prove to lenders that you are able to pay off the loan. It is important to remember that a home improvement loan will add to your debt. That is why you will need to have to provide proof of income.
Lenders want to lend to people who are not overextending themselves financially. Your mortgage payments should be less than 30 percent of your income. For example, if your income is $4,500, then your mortgage payments should not be greater than $1,500. Lenders will use your income to determine how much you will be able to borrow.
Your credit may not be checked. Many lenders do not check credit because it is a secured loan that is backed by equity. However, you should make sure that your credit is up to par before you apply just in case the lender decides to check your credit. If you miss mortgage payments and have a lot of debt, then you may have a harder time getting approved.
Risk profile is something that lenders consider before they approve you. A good credit score shows that you have consistently paid your bills on time. Lenders consider you to be less risky to lend to if you have a good credit score.
Many lenders require a minimum credit score of at least 620. However, if your credit score is above 680, then you will likely have an easier time getting approved. Make sure that all of the information on your credit report is accurate.