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Home equity borrowing has been a top option for many Americans over the last few years, buoyed by rising home values, higher interest rates on other types of debt and financial necessity. On the last point, many households turned to home equity loans and home equity lines of credit (HELOCs) as an alternative to higher-interest credit cards for emergency funds.
U.S. homeowners now hold an average equity amount of around $320,000. With so much equity available, you might consider borrowing against it with a HELOC as an affordable option. These credit lines typically come with lower rates than personal loans and credit cards.
A HELOC can be beneficial as a “borrow-as-you-go” option, which can help you avoid taking out more than you need. However, the HELOC application process differs from personal loans and credit cards, as it may include a home appraisal and more extensive underwriting—something to consider if you’re trying to borrow money quickly. If you’re looking to open a HELOC, it’s a good idea to familiarize yourself with the timeline for getting one approved so you know what to expect.
Start by seeing what HELOC interest rate you’d qualify for here.
What is the HELOC approval process?
The timeline for getting a HELOC may take longer due to a few extra steps, but the process for taking out a home equity line of credit is pretty straightforward: You fill out an application online or in person with a loan officer. You enter your recent residence history along with your employment, income and asset information. As with other loans, the lender pulls your credit report and typically will ask you to provide pay stubs, W2s or other forms of income verification.
With a HELOC, your home must be appraised to make sure you have enough equity to qualify. “Many HELOC or home equity programs use an AVM (automated valuation model) for an appraisal,” says Jeremy Schachter, branch manager at Fairway Independent Mortgage Corporation. “It usually is a bit more conservative than getting an appraisal. Depending on what the value comes back at, the lender may upgrade and get a drive-by appraisal or a full appraisal.” How quickly your HELOC is approved depends largely on this step, while the time to receive funds may take longer, depending on the lender.
Once the approval is completed, the lender reviews the home title to verify what liens are on the property. “After all the title work, your home value and documentation are reviewed, [and] you would sign your loan documents, usually in front of a notary. Some lenders wait a certain period of time before they close and record on the loan and some don’t,” says Schachter.
Get started with the HELOC application process here now.
How long does it take to get a HELOC approved?
The timeline for approving and funding a HELOC can vary widely depending on the lender, your property and the number of loans in their pipeline. Average approval times—from application through closing—are usually around 30 days but may be less if you provide the required documents quickly, notes Brian Shahwan, vice president and mortgage broker at William Raveis Mortgage.
“Turn times for HELOC approval may vary by lender and property type but typically can be offered within the first two weeks of launching the loan. So long as the borrower provides their documents in a timely manner, the file can be presented to the underwriter quickly,” says Shahwan. “In low volume times, a borrower may be able to close on a HELOC much faster.”
How to speed up the HELOC process
Since closing times vary by lender, shopping around may help you find one with a faster process and a low rate. For example, you might look for a lender that uses an AVM appraisal, which provides an instant home value estimate and saves time compared to a full appraisal.
Some lenders may require a full in-home approval if you’re borrowing a significant amount. As Brandon Angotti, vice president, financial planning and trust officer at Union Savings Bank, explains, “If the line of credit is small, typically less than $250k, an official appraisal is not required, and there are less stringent underwriting requirements when compared to a mortgage.”
Remember, you also play a significant role in how fast your application is approved, as the lender will need your cooperation to complete the underwriting process. “Gathering and uploading documents quickly will absolutely quicken the HELOC process,” Shahwan says. “Typical delays revolve around waiting for documents to be uploaded as well as appraisal orders to be completed. Being responsive and reviewing and signing disclosures in a timely manner is also a huge time saver.”
The bottom line
HELOCs can help you achieve many different financial goals at some of the lowest interest rates on the market, but remember the process may take a little longer than other forms of credit. If you’re not sure about getting a variable-rate line of credit, you might look into a home equity loan, which offers a single, lump-sum payment at a fixed interest rate, though the time frame is similar to that of a HELOC. “The process for a HELOC and home equity loan are the same,” notes Schachter.
If time is short, a personal loan is a quicker option, with many online lenders funding loans as soon as the same day. Just be aware that the borrowing amount will likely be lower and the interest rate higher than a home equity loan or HELOC.
Have more questions about the HELOC approval process? Learn more here now.
