Owning a home can be a great way to build wealth, especially once you’ve built up a significant amount of equity. one popular way to access your home’s value is by taking out a home loan, which is a type of second mortgage. It’s helpful to understand how long it takes to apply for home equity loans and receive funds so you can decide if they’re right for your situation.

with home equity loansyou borrow the equity in your home or equity in the property you actually own.

To find out how much equity you have, take the value of your home and subtract your current mortgage balance. This is your equity stake. You can usually borrow between 80% and 85% of your home equity.

Home equity loans offer lump sum payments, so after closing, you’ll receive the loan amount in one lump sum. You can then use that money however you want: on home repairs, college tuition, or even to pay off credit cards and other debt. While you should carefully consider the pros and cons of using the money for each purpose, there are no rules about how you can use these funds.

Most home equity loans have fixed interest rates and terms ranging from five to 30 years. You will repay the loan in set monthly payments over the term of the loan, just as you would with a traditional fixed-rate mortgage. Home equity loans use your home as collateral, so if you don’t make your monthly payments, the lender can foreclose on your property.

To get a home loan, you’ll need to apply, submit documentation, wait for a home appraisal, and finally close on your loan. After that, you will receive your funds in one lump sum.

Here’s a look at how long each step typically takes:

• Application: This is when you fill out the home loan lender application and submit the required documentation. You should be able to complete this step one day

• Rating: Your lender uses the home appraisal to determine the value of your home, and the amount of equity you need to borrow. You can receive the appraisal report between six and 20 days after the appraiser appraises the home.

• Subscription: In the subscription processthe lender analyzes your credit, financial information and the details of your loan application to make sure you qualify for a home equity loan. This may take up to a month

• Closing: After underwriting and approval, you must close on your second mortgage. Your closing appointment is when you will sign the loan documents, pay your closing costs, and finalize your loan. This should be done in one day

• Funding: You should receive your home equity loan funds after the right of withdrawal period closes. Legally, that is at least three working days.

According to the Mortgage Bankers Association, the industry-wide average number of days from home equity loan application to approval is 39 days. The exact amount of time it takes from start to finish is up to you home equity loan lender. For example, Better mortgage claims it can close HELs in just three days

How quickly you submit the necessary paperwork, how quickly your lender requests an appraisal, and other factors all play a role in this timeline.

While your choice of lender plays a big role in the speed of your home equity loan, there are other ways to control how long your investment loan process takes. If you want to speed up your home equity loan, try the following:

1. Prepare your documentation before applying. You’ll want to have pay stubs, bank statements, tax returns, W-2s, and property tax bills handy so you can send them with your application. Any delay in submitting the required documentation will only prolong the home equity loan process.

2. Keep your job and your income stable. Changes in your employment or income during the application and underwriting process may invalidate your loan approval. Try to keep your work and hours stable, and consistent with the information you submitted in your application, until closing.

3. Maintain a stable financial profile. Likewise, any drastic changes in your bank account balances, debts or credit score can slow down the loan process. Avoid putting large transactions on credit cards while you are in the middle of a loan application. You should also make sure you’re paying your bills on time so your credit score stays high, and avoid applying for new loans or credit cards until you’ve closed your home equity loan.

You should also be selective about which lender you work with. Consider a few different options and ask them about their current workload and closing deadlines.

The Requirements for the approval of loans in the value of the home it will depend on your lender, but you generally need a credit score of at least 680, a debt-to-income ratio of 43% or less, proof of homeowners insurance, and sufficient equity in your home.

The biggest disadvantage of a home equity loan is that it uses your home as collateral. This means that if you don’t make your monthly payments, the lender can foreclose on your house.

The answer depends on the loan term you choose and the interest rate you qualify for. If you were to take out a $50,000 10-year loan at 8%, your payment would be just over $600 per month.

Laura Grace Tarpley edited this article.