What to expect during the home equity loan closing process

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Do you remember having to close on your home’s first loan? Well, you’ll have to close on a home equity loan, too! Let’s talk about how the home equity loan closing process works.

Processing your home equity loan

After you’ve applied for a home equity loan, you typically enter a processing period. This is where your lender conducts all the necessary due diligence before deciding whether to approve your loan application.

The processing period may include the following:

Verifying your borrowing ability and creditworthiness
Conducting an appraisal of your home
Running a title search to identify any existing liens or other problems associated with your property
Preparing home equity loan documents

Home equity loan closing costs and interest

Home equity loans may carry closing costs, such as application fees, origination fees, and title search fees. Depending on the lender, you may be able to roll these costs into the loan amount and not pay them upfront.

Another expense associated with home equity loans is the interest paid on borrowed funds. Your interest rate may be based on factors such as market conditions, your credit score, and your combined loan-to-value (CTLV) ratio. CLTV is calculated by adding your new loan amount and your current mortgage balance(s), then dividing this amount by your home value.

Before you close on your loan, it's crucial to understand how interest rates work and how they affect how much you’ll repay when borrowing funds.

Home equity loans typically have a fixed rate, which means the amount of interest you pay every month will stay consistent over the life of the loan.

LEARN MORE: Home equity loan closing costs & fees

Discover® Home Loans offers low, fixed rates on home equity loans up to 90% CLTV with $0 costs due at closing.

Navigating the home equity loan process

Understanding the home equity loan process might feel like decoding a complex puzzle while blindfolded. Don’t worry, though! The process can be broken down into clear steps and timelines:

Gather documents: Your lender may ask you to provide documents such as W-2 forms, pay stubs, tax returns, mortgage statements, and other personal financial records.
Anticipate an appraisal: You may need an appraisal of your home to determine its current market value. There are different methods for conducting an appraisal that your lender may use, so be sure to ask what to expect.
Dive into the disclosures: Various disclosures may be sent your way during the home equity loan process. These documents may tell you about the terms, conditions, potential risks, and other information associated with the loan. Make sure to read them carefully, and don’t hesitate to ask questions if something doesn’t add up.
Sign on the dotted line: If your loan is approved and you're happy with the terms and conditions, the home equity loan process is nearly complete. Your lender will provide a final agreement for you to review and sign.

The home equity loan process might seem complicated. However, think of it as a journey toward utilizing the equity you’ve built in your home. Take things one step at a time, and celebrate each milestone along the way.

How long it takes to close on a home equity loan

The process of getting a home equity loan will vary depending on your individual circumstances, the lender's timeline, and other factors. With Discover Home Loans, the loan process from initial application to funding typically takes between 5-7 weeks.

That time frame breaks down like this:

Getting the basics (around 1-2 weeks). Apply online or over the phone to review your loan options, then upload the required documents. We’ll confirm your initial eligibility.
Processing your info (around 4 weeks). We’ll gather third-party information about your home and then send your complete application to underwriting for a final decision.
Closing your loan (around 1-2 weeks). We’ll contact you to schedule your closing and then arrange for your loan funds to be sent to your account.

You can help the process go smoothly by sharing requested information in a timely manner via our secure website.

Closing on your home equity loan

In most cases, a notary may meet you at your home, office, or other convenient location where you will sign your loan documents. In some states, an attorney we will provide must also be present.

Once the loan is closed, you have three business days to change your mind and cancel the loan in some circumstances. You will typically receive your money on the 4th business day after closing.

If you’ve decided a home equity loan from Discover is a good fit for your needs, your next step is to apply.

Main: The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover® Bank or its affiliates.

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Discover Home Loans Restrictions and Details

We do not lend in IA or MD. You are not guaranteed approval. Once you apply and submit your credit and property information, we will confirm your eligibility. We don’t lend on cooperatives, condotels, investment properties, log homes, manufactured homes, mobile homes, or secondary homes. We will only originate one 1st lien mortgage per property per 12-month period. The maximum loan amount you qualify for will depend on additional factors, including type of loan, lien position, loan-to-value and your credit history. We may change rates, program terms, and conditions without notice. Discover Card accounts may not be paid off with this home loan. All loan programs are offered by Discover Bank, 2500 Lake Cook Road, Riverwoods, IL 60015. NMLS ID 684042.