Financing Your Home Improvement Project

Find Financing

Step 4 is all about home improvement financing.

We invite your to jump over to our home equity lending site
for home equity credit lines and home loans at:

http://www.YourEquity.com

This center provides all the resource information you
need to select the right home equity solution for your
home remodeling needs.

You can return to this site by linking to the home improvement guides found in the site navigation section.

Getting Approved

Lenders use several criteria to qualify a home buyer for a home equity loan. The most important criteria include:

1. the home appraisal
2. your credit rating (more information about credit ratings)
3. qualifying debt-to-income ratio
4. your employment

The Home Appraisal:

• Lenders will not extend your requested financing amount unless they know the market value of your existing home.
  
  That is why many lenders complete some type of home appraisal before they qualify any financing amount.
  
  
  
• Most lenders qualify loan amounts at 80% LTV or lower,
  which means that they will underwrite a loan that is 80% of the appraised or market value of the home minus your current mortgage loan balance (includes any second and third mortgages).
  
  Many lenders now qualify applicants at 100%LTV or higher — which means they will lend you the full equity value of your home minus any mortgage loan balances.
  
  we have an LTV calculator that estimates your equity position
  
  
  
• We have additional information about home appraisals:
  view our Home Market Valuation

Qualifying Debt-to-Income Ratio

• Your capacity to repay your loan is an important factor that lenders consider when qualifying an applicant for financing.
  
  If the capacity ratios are too high, you will need to change one of the following parameters in order to qualify:
  
  
  • reduce your borrowed amount
  • borrow at a lower LTV
  • increase your income
  • pay off outstanding debts
    
    
    

Debt-to-Income Ratio:

The "debt-to-income ratio" is the most commonly used ratio for qualifying an applicant.

It is calculated by dividing your fixed monthly expenses by your gross monthly income. As a basic rule, the debt ratio should not exceed 36%.

What are your fixed monthly expenses:

• monthly housing expenses (loan payments, taxes, insurance)
• estimated monthly payment for you home remodeling financing
• other monthly installment loan payments
• monthly revolving credit line payments such as your credit cards
• real estate loan payments on non-income producing property
• alimony and child support payments
• any tax or legal assessments.
  

Debt-to-Income Ratio Calculator
Input the following numbers to calculate your income-debt ratio:

=
Estimated Total Housing Expense: mortgage loan payment on your home including interest and principal real estate taxes hazardous insurance private Mortgage Insurance, if any other mortgage related insurance homeowner's association dues ground keeping fees property leases other special assessments and financing
Enter the estimated monthly payment for your home equity financing or enter your financing parameters below: Home equity loan amount: Number of months to repay: Home equity loan rate (APR): Click here for a blended sample of home equity rates %
Est. Total Monthly Installment Loan Payments:
Est. Total Monthly Revolving Credit Line Payments:
Est. Monthly R. Estate Non-Income Loan Payments:
Est. Monthly Alimony and Child Support Payments:
Est. Monthly Tax and Legal Assessments:
Est. Monthly Other Payments:
Total Monthly Income: employment income overtime bonuses and commissions net self employment income alimony, child support and income from public assistance social security, retirement, and VA benefits workman's compensation or permanent disability payments interest and dividend income income from trust, partnerships, etc. net rental income
Debt-to-Income Ratio (should be less than 36%):	%

Your Employment:

• Your capacity to repay the home equity loan is contingent on your employment and the income it produces.
  
  Lenders like to see loan applicants in steady jobs with verifiable income.
  
  Lenders will likely call your employer to verify your employment position and salary/wages.
  
  Any discrepancy in your reported employment and income may raise additional questions that can disqualify you for financing.
  
  
  
• Self-employed individuals will require additional documents to ensure lenders that the applicant has steady income.
  
  These documents will include your personal tax filings and other information as required.