If you’ve been thinking of taking out a home equity loan but not quite sure how home equity loan applications are evaluated, here is an overview of what you can expect and the items Discover Home Equity Loans reviews on each application. Upon submission, we review:
- Credit Score
- Credit History
- Employment and Income Verification
- Sufficient Equity
Your credit score is an algorithm comprised of five facets of your credit past – Payment History (35%), Amount Owed (30%), Length of Credit History (15%), Types of Credit Used (10%) and Recent Inquiries / Accounts Opened (10%).
Discover Home Equity Loans has a minimum credit score requirement of 620. The better your credit score, the better your rate will be, though there is still dependence on your income and equity.
Credit scores are a direct result of your credit past. Late payments can stay on your credit report for up to seven years. However, more recent delinquencies impact your score more than older ones.
Employment and Income Verification
We will verify your employment and income information by reviewing your most recent W2 forms as well as your most recent paycheck stubs covering 30 days, if applicable. If you’re self-employed or receive income from other sources than an employer, we will ask for your most recent federal income tax returns. If you receive retirement or 401k income, we’ll review a retirement award letter or 401k distribution letter. See our application checklist for a list of documentation needed during the application process.
The primary metric we use to determine your qualification and interest rate is your combined loan-to-value ratio (CLTV). CLTV is calculated by taking your existing mortgage balance(s) plus your desired loan amount, divided by your home value:
CLTV = (Loan Amount + Mortgage Balance) / Home Value
We lend up to 90% CLTV, and in some cases 95% depending on your loan amount and credit. We will perform an evaluation of your property’s current market value using an Automated Valuation Model (AVM), Property Condition Report, and in some cases we will schedule an appraisal. We will also review your mortgage statements.
Home equity loans can help you accomplish a number of things, including home improvement, debt consolidation, paying for your education or other major expenses, and even refinancing.
Discover Home Equity Loans offers loans from $35,000-$150,000. The factors detailed in this article will determine your interest rate. If you are interested in a home equity loan from Discover, talk with a Personal Banker today at 1-855-361-3435 to get a quote or apply online now.