Pittsfield, MA -- (SBWIRE) -- 07/18/2013 -- Real-estate-yogi.com is here to help people understand this product by offering its input on the subject, such as:

- Defining Equity
- How to Use a HELOC
- HELOC Debt-to-Income Ratios
- Credit Scores

Understand Equity
When it comes to how to qualify for a home equity line of credit, it’s necessary to understand the true meaning of “equity,” especially considering it’s such an important form of collateral for a loan or line of credit. “Equity” is defined as the value of a home, less its mortgage. The best thing about a HELOC is that a homeowner can draw from it over time and only pay interest on what he uses.

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Using a Home Equity Line of Credit
Putting home equity lines of credit to use requires that the equity in the home be more than or the same as the amount of the LOC. A normal HELOC won’t utilize more than 80% of the equity in the home, which will be tabulated by an appraiser. Once a HELOC has been approved, the homeowner can draw from it as he sees fit, and can use the money for anything he wishes.

Debt-to-Income Ratios
Another part of how to qualify for a home equity line of credit includes knowing the limits on one’s debt-to-income ratio. Lending institutions need to know that a person will be able to repay the HELOC plus interest, which means looking at his W-2s to validate his income. Next comes comparing his debts – the HELOC payments, the mortgage payment, the insurance costs, and the taxes on the property - to his income. These debts shouldn’t come to more than 28% of his total gross income for a month.

Lenders and Credit Score
One’s credit score has a big effect on the amount of a HELOC. It can also put a roadblock in how to qualify for a home equity loan. If the number of the credit score is low, one may not be able to qualify for either a HELOC or a home equity loan. If it’s in the middle register, one’s chances improve, and if it’s high, the loan is virtually guaranteed. Obtain copies of the credit reports once a year from the major reporting bureaus.

About Real-estate-yogi.com
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