It can take anywhere from two weeks to two months to get a home equity loan. Why such a large window? It boils down to three main factors:
- The home equity loan application process
- The approval process
- The funding process
Here, we’ll explain what these factors account for, why they take time, and what you can do to speed up the home equity loan approval process.
How Long Does the Home Equity Loan Application Process Take?
The home equity loan application process can be relatively short, but it can take weeks. The application process can be broken down into three main parts: choosing a lender, getting preapproved, and gathering the documents for your application. Let’s dig into each piece of this.
1. Choosing a Lender
Choosing a lender will be the most time consuming process when you’re looking for a home equity loan. That said, take the time to shop around. Banks, credit unions, and online lenders each have different loan terms and interest rates.
If you don’t know where to start, consider talking to the lender who provides your mortgage. If you have a strong payment history with them, you may be able to get favorable terms.
Do thorough research before choosing a lender. The more time you put into this process, the more confident you can be in your decision.
2. Getting Preapproved for Your Home Equity Loan
You may be able to speed up the home equity loan process by getting preapproved. This doesn’t guarantee that you’ll be approved, but it gives you a good idea of whether you’ll qualify for the home equity loan you’re seeking.
Preapproval will typically determine whether you meet general home equity loan requirements. It will require that you have:
- A minimum of 15% equity in your home
- A low debt-to-income ratio. Most lenders want you to have a DTI lower than 30%, but many are willing to lend even when your DTI is as high as 40%. Want to lower your DTI? Check out our guide on the topic.
- A credit score of 600 or greater. But keep in mind, some lenders will be willing to lend to you with a credit score as low as 580. This may be more likely with a credit union that you already have a positive relationship with.
3. Gather Documents for Your Application
Home equity loans will require personal information. This helps the lender make a prudent decision for the both of you. That information generally includes things like:
- Proof of employment and income through a 1099 or W2. Being a self-employed borrower may be a hurdle, but it shouldn’t discourage you. Be proactive and see if your chosen lender has guidance on what documents you can provide if you’re self-employed.
- Mortgage statements
- Bank statements
- Statements from other investment portfolios
Your lender may request other information. Additionally, you’ll need to provide proof of your identity, such as a driver’s license and Social Security Number.
Finally, you’ll need to determine how much you want to borrow.
Gathering these documents shouldn’t take a long time, but it might take an afternoon to locate and organize them.
How Long Does the Approval Process for a Home Equity Loan Take?
The approval process is usually the most time-consuming part of a home equity loan application. It’s composed of two parts: the appraisal and the verification or underwriting process. This part of the home equity loan process can take as long as a month!
Having Your Home Appraised
Before a lender can make an accurate decision on whether to give you a home equity loan, they need to know how much your home is worth. A home appraisal is a way to determine your home’s value by assessing its condition, as well as the value of comparable homes in your area. Depending on the value of your home, you may have more or less equity than you expect.
Appraisals are usually scheduled within 48 hours of being requested. But, it could be as long as two weeks before an appraiser actually visits your home depending on your local real estate market. This can draw the process out further.
The Verification and Underwriting Process
After your appraisal, your lender will verify that everything checks out in a process called underwriting. They’ll make sure that you can afford the loan, that you’re a reliable borrower, and that you have the equity you say you do.
They’ll also check your home’s title to ensure that there aren’t any tax liens or other secured loans that haven’t been accounted for. Essentially, the lender is making sure that they’re not making a mistake lending to you.
To ensure the verification or underwriting goes as smoothly as possible, make sure that you have provided your lender with all the information they need, and be prepared to share additional information if they request it.
Finally, the underwriting process finalizes the terms of the home equity loan agreement and prepares the documents you’ll review once approved.
How Long Does it Take to Fund a Home Equity Loan After Closing?
When your home equity loan is approved, you’ll need to sign off to close it. Additionally, lenders need to provide you with a Truth in Lending disclosure form, and give you two notices of your right to rescind.
The signing process will vary depending on your lender, but is usually fairly quick. You can expect to receive your funding soon after signing, but it may take several days to go through. This tends to be the shortest part of the home equity loan process.
Common Causes for Delays and How to Speed Up the Process
So the home equity loan process can take a long time. But what if you can’t wait two months? Is there anything you can do to speed the process up?
Yes and no. The bulk of delays occur during the approval process. Unfortunately, the appraisal and underwriting process is generally out of your control. However, you may be able to take certain actions to make the process quicker:
1. Get Preapproved
Taking the time to verify that you meet the lender’s eligibility requirements might take a little bit of time, but it could save time down the line. It will give you an idea of what’s needed to qualify and help you get your documents in order for your application.
2. Provide Ample Information in Your Application
While this point may seem obvious, it’s worth reiterating. Make sure that your application includes every piece of information that the lender requests. This helps them move through the verification and underwriting process without having to contact you for more information. That back-and-forth communication can slow the approval process down.
3. Opt for Alternative Appraisal Options
Choose desktop, virtual, or drive-by appraisals if your lender offers them. With these appraisal methods, you may be able to have it completed sooner than with a traditional, in-person appraisal.
I Still Need Cash Faster — What Can I Do?
If you’re facing medical bills, mounting debts, or unpaid property taxes, the stress can set you on edge. A lengthy approval process that doesn’t give you much control is the last thing you need. So what options do you have?
SKYDAN’s home equity solution might be the answer you’re looking for. Our sale-leaseback program allows you to quickly tap into your home equity. And what’s even better is that we don’t have the strict eligibility criteria that traditional lenders have. We don’t care about your credit score, income, or debts — because we’re not a lender. Here’s how our program works:
- SKYDAN buys your house and gives you your equity in cash. But you don’t move out.
- Then, you lease your home back from us. We agree on an affordable rent for not more than two years.
- Rent is deferred to the end of the agreement, so you have no monthly payment.
- Finally, you can either purchase your home back for the original price plus deferred rent, or sell the property at market value and receive all the additional equity.
We know. It sounds too good to be true. That’s what our customer Sally told us. But it’s not. SKYDAN is the “real deal,” as Sally put it. We’re committed to helping homeowners like you take control of your life, not making money by putting you in debt.
To get started with SKYDAN’s program, see if you qualify today.