Home Improvement Loan Products

There are several home improvement loan products available on the market. Homeowners are encouraged to do some research prior to deciding on any one product in order to get the home improvement loan that is right for them.

If you are a homeowner and want to remodel your kitchen for example, you will need a lot of money if you want to get a professional job that is well done and will last for a long time. The first thing you need to do is get a few estimates from professional contractors and then compare them. Once you decide on a contractor, you are almost ready to go to the bank.

Before you go to the bank, however, please make sure that you have checked your credit score. These days, due to the tough economy and the proliferation of bad loans, banks and lenders have tightened up lending requirements.

You need to have pretty decent, if not perfect credit in order to qualify for most home loans these days and HELOCs are no exception. You can get a free copy of your credit report by petitioning any or all of the three major credit reporting agencies. By law they have to provide you with a free copy when you request it in writing.

A Home Equity Line of Credit (HELOC) is the most popular type of home improvement loan and they are fairly standard, with a few exceptions. A HELOC is really a second mortgage lien against your property and requires that you have a certain amount of free equity in order to qualify.

Combined first and second loan to value (CLTV) ratios are usually limited to under 70% for qualifying purposes. A HELOC is usually an ARM (adjustable rate mortgage) with rates tied to an index, usually the Prime Rate plus a margin.

For example if the today’s Prime Rate is 8% and the margin is 1, then your rate will be 9%, adjustable monthly based on what the Prime Rate is doing. These home improvement loans are usually interest only for ten years at which time the principal is due (balloon payment).

Banks will require that you have not only good credit but a steady, long-term employment or proof of income in order to qualify for the home improvement loan or HELOC. You will usually be required to provide two recent paystubs and twelve months of bank statements (all pages).

These home improvement loans can be processed fairly quickly so that you can get on to the important part, fixing your house.