Home Equity Loan Requirements
Published October 15, 2016
If you’re like many Americans, you may be considering a home equity loan to pay for some long-desired home improvements, a new car or another investment.
Wondering what such an application would take? While you may be surprised at the documentation required, the process as a whole remains less labor intensive than taking out a mortgage. And gathering the correct documentation could be well worth your while, since the popular lending tools usually offer the advantage of attractive, tax-deductible interest rates.
Home equity loans are seeing a resurgence right now due to rising property values nationwide and fewer homeowners with upside-down mortgages. Average home prices rose 6.4 percent in 2014 and another 4 percent last year. Additionally, after the first quarter of 2016, more than 12.3 million U.S. properties were deemed equity rich with loan-to-value ratios of 50 percent or less, marking a nearly 20 percent increase from Q1 of 2015.
That means many Americans who previously didn't have enough equity in their homes to qualify for a second mortgage now have better chances of approval.
At Amplify Credit Union, we like to see a minimum credit score of 600 before considering a home equity loan, and interest rates and terms offered improve with scores above that level.
Here’s a rundown of materials you’ll need to have prepared when meeting with your Amplify Credit Union agent.
- Your signed preliminary application and loan disclosure (the ones we email to you). The application will be updated throughout the loan process.
- Your most recent paystub reflecting year-to-date earnings for at least 30 days.
- Your W-2 and 1099 forms from the most recent tax year, delineating income from all employers over that time. Copies from online are fine as long as they include the employer and employee names, and dates of employments.
- A pension statement or provider award letter reflecting any income from Social Security, disability, death benefits, your pension or your retirement funds; it should state the income type, amount and frequency.
- If you’re self-employed or receiving income not noted on your W2, you must bring all pages and schedules in your most recent personal tax return as well as your year-to-date profit and loss statement. The return(s) must be complete and signed. A business tax return is necessary if you have 25 percent or more ownership interest, and a personal tax return is needed if you receive rental income.
Information About the Collateral Property
- Your most recent mortgage statement showing the account number, information about all lien holders, current payment amounts and balance owed. If you’re subject to multiple liens, the same mortgage statements are required for those.
- Your receipted homestead application (if it’s in process and no county homestead exemption is filed).
- Proof of annual dues paid to a homeowners’ or condominium association, if applicable, along with contact info for property management and a copy of its most recently approved company budget.
- Your homeowner’s and flood insurance policies, delineating current coverage and confirming the address. Homeowner’s insurance is required for home equity loans.
- If you own other properties, the lender needs the same mortgage statements, lien-holder info, association information and insurance info for those, as well as your most recent property tax statement.
Other Necessary Information
- Your current (unexpired) driver’s license, resident alien card or visa. Your ID must include a photo, and your resident alien card can’t be set to expire in the next six months. With a visa, you must also bring the official sponsor letter that’s usually signed by your spouse or employer.
- Separate signed letters of explanation explaining the following: the purpose of the loan; reasons for inquiries on your credit report within the last 120 days; address variations showing up on your credit report in the past two years; reasons for derogatory listings on your credit report; and reasons for additional Social Security numbers on your credit report.
- Current account statements for any non-mortgage debts to be paid off at closing, if applicable.
- If you wish to include child support or alimony in your application, bring the decree or agreement showing the amount, frequency and duration as well as your most recent bank statement proving receipt. Payers of child support or alimony must also show their decree or agreement.
Analysts expect demand for home equity loans to expand even further as the economy keeps improving.
“The market for home equity loans and lines will likely continue to grow as a larger pool of qualified borrowers looks to take advantage of low rates to make property improvements or pay off higher-interest debt,” American Bankers Association Chief Economist James Chessen predicted in July.
Ready to Apply For Your Home Equity Loan?
Click the button below to visit our Home Equity Loan page and fill out the contact form. An Amplify agent will call you back and complete your application over the phone. You can also learn more about Texas Home Equity Loan Guidelines and Amplify's Home Equity Loan Process.