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What to Look for in a Home Equity Lender

Using your equity

Picking a lender for a home equity loan can be an important decision. The lender you select should make you feel comfortable and informed with the home equity loan process.

You should look for a lender who is upfront with you about the entire loan process, especially the requirements needed to get a loan. Look for a lending partner who explains the basic guidelines for getting a home equity loan (or other loan product).

For example, Discover Home Equity Loans publishes our guidelines on this FAQ page, and we’ve provided them here as well:

  • Credit score of at least 620
  • History of responsible credit use
  • Verifiable employment and income
  • Sufficient equity in your home

Clarity and visibility are necessary requirements for any financial partner. You should receive documentation on the requirements, rates and costs associated with your loan.

Do You Meet Their Requirements?

Another consideration involves the ability to meet loan requirements. One common requirement lenders use is combined loan-to-value (CTLV). CLTV is your desired loan amount plus any mortgages you have, then divided by your home value. While CLTV limits vary by lender, Discover Home Equity Loans lends $35,000-$200,000 up to 90% CLTV. In some cases you can get up to 95%, depending on your credit score.

Credit scores are also a common requirement. Your credit score has a direct effect on your loan interest rate. If your credit score is higher, your rate may be lower, though other factors, like CLTV, play a role as well.

We recommend you look for a lender who gives you options to check loan amounts on your own. Try our loan amount calculator to help you determine how much you may be able to borrow, then use our monthly payment calculator to determine your potential rate and monthly payment based on a specific loan amount. While these numbers are just estimates and not guaranteed until the application is processed, it usually gives you a good idea.

If you don’t see or understand something, call a lender to learn more.

What About Costs and Fees?

Costs and fees are an important consideration for anyone who is looking for a loan. Some of the fees, costs and other items to consider include:

  • Annual percentage rate (APR) of your loan
  • Monthly payment amounts
  • Origination fees and closing costs
  • Tax, insurance, recording and other service fees
  • Prepayment penalties

Take the time to understand the fees that are applicable to your loan options, and even create a spreadsheet. That way, you can compare costs across different lenders for loans of the same amount or term. You should also look for prepayment penalties that might be associated with late payments or refinancing.

Discover Home Equity Loans does not charge application, origination, or appraisal fees, and no cash is required at closing. The mortgage interest on a home equity loan may be tax deductible depending upon how you are using your loan. Consult a tax advisor to learn more.

What Do Others Have to Say?

The internet is expansive, and you can use that to your advantage when finding a loan. There are many third-party services with their own review sites. Look for a site that is related to your loan product, such as Zillow, if you’re considering a mortgage, refinance or home equity loan.  Don’t forget to ask your friends and family for recommendations too!

When it comes to your financial future, use every tool at your disposal. Take all the time you need to find the right lender so you can get a loan that will help secure your financial future.

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