How Long Does It Take To Get A Home Equity Loan?

You can turn to a home equity loan to fund a major kitchen renovation, pay for the addition of a primary bedroom, consolidate your high-interest-rate credit card debt or cover part of your child’s education expenses.

But how long does it take to get a home equity loan? Unfortunately, there is no single answer. But generally, it can take anywhere from 2 weeks to 2 months, depending on your unique situation, how quickly you get your paperwork to your mortgage lender, how long it takes for your lender to order an appraisal of your home and whether you have any credit or income challenges that might make qualifying for a home equity loan more difficult.

Ready to tap into your home’s equity? Here’s how the process works.

What Can You Do To Help The Process?

The speed of closing your home equity loan will depend largely on you. The faster you can gather and send your closing documents – such as copies of your most recent paycheck stubs, last 2 years of income tax returns and last 2 months of bank account statements – to your lender, the faster this lender can close your home equity loan.

Don’t forget, too, that you need enough equity in your home to qualify for a home equity loan. Equity is the difference between what your home is worth and what you owe on your mortgage. If you owe $200,000 on your mortgage and your home is worth $375,000, you have $175,000 in equity.

This number will vary, but most lenders let you borrow up to 90% of your home’s value, depending on your credit and lender. If your home is worth $400,000, take 90% of that value ($360,000), then subtract what you currently owe on the mortgage. So, if you owe $100,000 on that home, you can borrow up to $260,000. You can spend this money however you’d like. You’d then repay it each month with interest. Because a home equity loan is a second mortgage, you’d now be responsible for two monthly mortgage payments, the one for your primary mortgage and a second for your home equity loan.

Home Equity Loan Process And Timeline

How does the process of qualifying for a home equity loan work and how long will it take you to complete the steps? Here’s a closer look at applying for and closing on a home equity loan.

Get Preapproved: Up to 10 days

The first step is to get preapproved for a home equity loan from a lender. By doing this, you’ll know how many home equity loan dollars you can access.

During the preapproval process, you’ll provide a lender with copies of documents that prove your monthly income. These can include copies of your last two paycheck stubs, last 2 months of bank account statements, last 2 years of income-tax returns and last 2 years of W2 statements. You’ll also give a lender permission to check your credit reports and credit score.

Once your lender accesses this information, it will tell you how much you can borrow against your equity. The letter will also state the interest rate that it will assign to your home equity loan. Remember, though, that some of these figures might change. For instance, your lender won’t know how much equity you have until it orders an appraisal of your home. Until then, it is just estimating the current market value of your home.

You are under no obligation to take out a home equity loan with a lender who has preapproved you and you do not have to pay for preapproval. You only pay once you close on a home equity loan with a lender.

How long it takes to get a preapproval letter depends largely on you. The faster you get your paperwork to your lender, the quicker the process may be.

Home Equity Loan Qualifications

What qualifications will you need to qualify for a home equity loan? That varies by lender, but here are some general guidelines:

• Credit score: You might be able to qualify for a home equity loan with a FICO^® credit score as low as 620, but many lenders require higher. Rocket Mortgage^® requires a score of at least 680.
• Debt-to-income ratio: Your debt-to-income ratio measures how much of your gross monthly income is consumed each month by your recurring debts. Recurring debts include your monthly mortgage payments – including your estimated new home equity loan payment – auto loan payments, payments that you make on student loans, personal loan payments and the minimum payment you must make each month on your credit card debts. Lenders may prefer that these debts equal no more than 50% of your gross monthly income.
• Home equity: You’ll also need enough equity in your home to qualify for a home equity loan. This will vary, but most lenders require that you have a loan-to-value (LTV) between 80% – 90%, depending on your credit score and lender.

Shop Around And Choose A Lender: 7 – 10 days

Once you have a preapproval letter, you can shop around with different lenders to find the lowest rate and fees. Again, this process can take time depending on how many lenders you explore. But shopping around can save you money in both fees and interest.

Complete Your Application: 1 day

Once you select a lender, you’ll need to fill out that lender’s residential loan application. Lenders will typically require that you provide personal information such as your full name, address, Social Security number and employer. You’ll also have to provide information on your gross monthly income and debts. Your lender will also want to know how much you owe on your primary mortgage.

If you haven’t already, you’ll need to provide your lender with copies of your paycheck stubs, tax returns and other financial records that it can use to verify your income.

How long this process takes is up to you. You can usually complete an application in less than 3 hours.

Have Your Home Appraised: 2 – 10 days

Once your lender receives your application, it will send an appraiser to determine your home’s current market value. Your lender needs this information to determine how much equity you have in your home. If an appraiser determines that your home is worth $350,000 and you owe $150,000 on your mortgage, you have $200,000 in equity.

An appraisal itself doesn’t take long. An appraiser will often finish touring your home and property within 30 minutes. But it could take 2 – 10 days – or maybe longer – for the appraiser to complete a report and send it to your lender.

Go Through Underwriting: Up to 1 month

During the underwriting process, your lender will study your finances and credit. The goal is to make sure that you can afford your new monthly mortgage payment. How long this takes will vary, but underwriting and processing a home equity loan can take up to a month. Some of this will depend upon whether your lender finds any unusual deposits or withdrawals when reviewing your finances. You can speed the process by quickly answering any questions that your lender has and promptly providing any requested documents.

Close On Your Home Equity Loan: 1 day

Once your lender approves you for a home equity loan, it will schedule your closing date. This is when you’ll sign the documents that make your loan official and pay any closing costs. Your loan’s closing should not take more than 1 day.

How Long Does It Take To Get Funds From A Home Equity Loan?

You’ll receive your money quickly after closing. Timing can vary, but the right of recission allows you to cancel your loan within 3 business days of closing. You’ll then typically receive your funds after that.

Factors That Can Impact Your Home Equity Loan Approval Timeline

Several factors can slow the approval of your home equity loan and the dispersal of your funds. These include:

• Errors with your paperwork: If your lender requests copies of such documents as your bank account statements, paycheck stubs and income tax returns, provide them quickly. The faster you get these documents to your lender, the sooner it can verify your income. If your lender finds problems with your paperwork – such as a suspiciously large deposit in your savings account or a sudden dip in your yearly income from last year’s tax return – answer questions quickly. The faster you can clear up any problems, the sooner your loan will close.
• Problems getting your home appraisal: It’s true that home appraisals can slow the lending process. If your lender takes several weeks to order an appraisal, that will delay your loan’s closing and lengthen the time from application to receiving your funds.
• Title issues: Your loan closing can be delayed if your lender finds issues during the title search. Maybe a government entity has filed a lien against your home, or maybe you owe back taxes. You’ll have to resolve these issues, perhaps by paying back the money you owe, before your loan closes.

Tips For Getting Your Home Equity Loan Approved Quickly

Here are some steps you can take to help speed up the home equity loan process:

• Know the requirements ahead of time. Before applying for a home equity loan, know what that lender requires from borrowers. Don’t waste your time applying for a home equity loan from a lender that requires a minimum FICO^® credit score of 680 if your score is only 600. If you have a lower credit score, don’t panic: Getting a home equity loan with bad credit isn’t impossible, but you must work with a lender willing to lend to borrowers with spottier credit histories.
• Have sufficient equity in your home. Make sure you have enough home equity to qualify for a home equity loan. You probably won’t want to pay for an appraiser to determine your home’s market value before you apply for a loan, but you can estimate this value from several online sites to at least determine if the odds are good that you’ve built enough equity.
• Have your documentation ready. Gather copies of your paycheck stubs, bank statements, income-tax returns and W2 forms before applying for your loan. That way, you can provide them quickly to your lender.

Home Equity Loan Timeline FAQs

Questions about the time it takes to get a home equity loan? Here are some answers:

How fast can I get a home equity loan?

There is no single answer to this question, but you can expect the process of qualifying for a home equity loan to take from 2 weeks to 2 months. You can speed up the process by answering your lender’s questions quickly and providing the documents it needs in a timely manner.

How long does it take to repay a home equity loan?

Home equity loans come with varying terms, but you can usually apply for loans with terms of 5 through 30 years. If your loan’s term is 5 years, you have 60 months to repay your loan. If it is 30 years, you have 360 months to repay what you’ve borrowed.

Can I pay off a home equity loan early?

You can always pay off a home equity loan early. Make sure, though, that your lender does not charge prepayment penalties, fees for paying your loan off too early.

Can I use a home equity loan to pay off my mortgage?

You can use a home equity loan to pay off your primary mortgage. This only makes sense, though, if your home equity loan comes with a lower interest rate than your primary mortgage. Using a home equity loan like this is a way of paying off your mortgage early without having to sell your home or refinance.

Is it hard to get a home equity loan?

The short answer is yes, it can be challenging. But having good credit, low debt-to-income ratio and appraised home equity can make the whole process easier.

The Bottom Line On Getting A Home Equity Loan

Home equity loans allow you to use your home’s equity for anything you’d like, including funding home repairs and consolidating higher-interest-rate credit card debt. But, like with all loans, applying for a home equity loan takes time. You can learn more about home equity loans in the Rocket Mortgage Learning Center.