There are many projects that can be done at home that will not only improve the quality of life but also increase the value of the property. However, these projects might take much of the client’s money to complete and bring to a successful end. If you have not been able to save adequately or if you wish to spread out your expenses, you can take up a home improvement loan. This article covers what home improvement loans are, how to qualify for them, where to find lenders for them and how to secure the approval.
What is Home Improvement Loan
A home improvement loan is a personal type of credit that can be used to pay for improvements, remodeling, or repairs to a homeowner’s dwelling. Like any other type of personal loan, a home improvement loan is cash that is advanced to you in a single payment and repaid gradually through regular, equal payments made over a specific period of time. Home improvement loans help you finance big or costly projects without having to touch on your savings or rely on costly credit cards. These are usually categorized under secured because the loans are secured by your home by way of lien.
Common Home Improvement Activities Financed
Home improvement loan can be used in any manner the borrower desires and there is little restriction regarding its usage. Common home renovation projects funded with these loans include:Common home renovation projects funded with these loans include:
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Kitchen, bathroom remodels
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Flooring replacement
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Roof replacement
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Siding replacement
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Window installation
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Landscaping
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Deck, patio addition
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Garage conversion
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Basement finishing
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Extension, addition
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Driveway, walkway reconstruction
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Electrical and plumbing systems, heating & air conditioning
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Solar panel installation
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Interior repainting
- Energy efficiency improvements
Home Improvement Loan Eligibility
For you to secure a home improvement loan, there are certain requirements that you must meet in relation to your credit score, income, employment, credit to income ratio and home equity. Requirements can vary by lender but often include:Requirements can vary by lender but often include:
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A minimum credit score between and
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Income per month, at least $
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Debt-to-income below percent
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Appropriate and adequate home equity
- Clear home title
Banks and other institutions that offer loans expect that you will be able to repay the loan. A good credit history, provable income, reasonable bills, and equity suggest that you are probably able to meet repayment.
Home improvement loans can be obtained from several sources; Here are the places you can get a home improvement loan.
There are several sources for securing financing for home remodeling or renovations:There are several sources for securing financing for home remodeling or renovations:
Bank Personal Loans
Banks provide home improvement installment loans with fixed interest rates and repayment periods. It ranges from one lender to another but most of them offer a relatively reasonable interest rate. They also do not have as many requirements as compared to approval requirements. Local banks have the benefits of branch network and customer-oriented services.
Online Lenders
Some of the pure online lenders for home renovation loans are LendingTree and Lightstream with online application, approval, and electronic closing and funding. It may be higher than the banking interest rate but it is advisable to compare the market. Some lenders give rate quotes without pulling credit reports and credit scores.
Credit Unions
If you are member of a credit union, look at what home improvement loans are available to you. Credit unions provide subprime rate and you may be eligible for further reductions on the rates. Loan maximums are generally lower than those found in banks. Credit standards can also be more customized.
Mortgage Refinancing
Refinancing through cash-out mortgage lets home equity turn to cash for upgrading. This option exposes your home to risk in the event that you are unable to meet your obligations as required. After that, they ask themselves whether the improvements will add more value and if they are willing to take a loan for that much. Closing costs also apply.
FHA Title I Loans
Federal Housing Administration Home Improvement loans or FHA Title I Home Improvement loans may be considered if your remodel is less than $, and you meet the equity requirements outlined in the program. These loans are not entirely collateralized by your house. Terms up to years make it possible to have affordable payments.
Home Equity Loans HELOCs
Home equity loans, and Home Equity Line of Credit or HELOC, are used to tap equity in a home for large improvement projects. These second mortgages expose your home for risk in case of default. This should only be if equity can repay the loan and credit rating of the business is good. While with HELOCs, the interest rates fluctuate periodically, home equity loans have fixed rate of interest. Both often cost less than other forms of financing.
Tips for Getting Approved
Follow these tips to strengthen your home renovation loan application:Follow these tips to strengthen your home renovation loan application:
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Borrow interest from various lenders
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Check your rates and terms before you apply to know what loans you are likely to be approved and offered.
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Inquire from the lenders whether they consider the rebates applicable to the current clients and autopay.
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Delineate how renovations will enhance home value to the underwriters
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Reduce current balances and keep credit card utilization low
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Do not apply for new credit as long as one has been approved
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Be ready to provide proof of income, job, home appraisal
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Ensure that all financial statements and records are well arranged in case one has to be provided.
- Take a cosigner if your credit score is low or just a notch above the minimum required
Consider all the details of the home improvement financing and then decide which one is suitable for you. Thus, you can afford great improvements for a home without draining your savings and your home equity by planning and borrowing wisely.
Conclusion
Home improvement loans and lines of credit obtained against the equity of your home are feasible solutions which enable spread the cost over time. Visit various lenders and programs to compare the best interest rates and repayment periods with your budget. To make sure you are approved for this purposeful funding, it is critical to follow the application tips outlined below to present yourself as a trustworthy borrower. This makes it possible for you to transform your home into your desired one through an affordable loan.
