Everything You Need To Know About The Home Equity Loan Waiting Period

Taking out a home equity loan can be a great way to access funds for home improvements, debt consolidation, or other major expenses However, there is often a waiting period you need to complete before you can get approved for a home equity loan In this article, we’ll explain everything you need to know about the home equity loan waiting period.

What Is A Home Equity Loan Waiting Period?

The home equity loan waiting period refers to the amount of time you need to wait after specific events before you can qualify for a new home equity loan. There are typically waiting periods after the following:

• Purchasing a home
• Refinancing your mortgage
• Taking out a HELOC
• Taking out a previous home equity loan

These waiting periods exist to protect lenders by ensuring your home value is stable before they loan you money against your home’s equity. The most common waiting period is 6 months, but it can range from 30 days up to a year depending on your situation.

Why Do Lenders Have Home Equity Loan Waiting Periods?

Lenders want to make sure your home value has stabilized before lending against your equity. Here are some examples of why waiting periods help lenders

• After purchasing a home Home values can fluctuate after a purchase The lender wants to ensure the value has stabilized before lending against it

• After refinancing: When you refinance your mortgage, you access some of your equity by taking out a new, larger loan. Lenders want that equity to rebuild before you tap it again.

• After a HELOC: HELOCs allow you to borrow against your equity, so lenders want time for you to pay down your HELOC before further borrowing against your home.

• After a previous home equity loan: Just like with a HELOC, the lender wants your equity to rebuild before lending against it again.

So in short, waiting periods protect lenders by allowing your home equity to stabilize or rebuild between loans. This minimizes their risk.

How Long Are Home Equity Loan Waiting Periods?

The most common waiting period for a home equity loan is 6 months. However, waiting periods can range from 1 month up to 1 year depending on your specific situation.

Here are some examples of typical home equity loan waiting periods:

• After purchasing a home: Most lenders require you to wait 6 months after purchasing before taking out a home equity loan. Some may allow shorter periods.

• After refinancing: 6 months is also the standard waiting period after a refinance. It allows your equity to rebuild before borrowing against it again.

• After a HELOC: HELOC waiting periods are usually shorter, often 1 month up to 6 months. This is because you haven’t taken out all available equity like a typical home equity loan.

• After a previous home equity loan: Waiting periods are longest after a prior home equity loan, usually 6 months to 1 year. The lender wants your equity to substantially rebuild first.

So while 6 months is typical, the exact length depends on your specific situation. Check with lenders to see their specific waiting period policies.

Are There Any Exceptions To Home Equity Loan Waiting Periods?

While waiting periods are standard, there are some exceptions where borrowers may qualify without one:

• Secured home equity loans: Some lenders offer home equity loans secured by your financial assets, like a savings account, rather than your home equity. These may not require a waiting period.

• FHA Title 1 Loans: These government insured loans help borrowers with low equity. They may waive waiting periods.

• Medical expenses: If you have urgent medical bills to pay, some lenders offer exceptions to standard waiting periods.

• Previously established equity: If you have substantial equity established prior to events like a refinance, some lenders may waive the waiting period.

• Major home improvements: In cases of damage or urgent repairs needed, waiting periods may be waived.

While exceptions aren’t guaranteed, it’s worth inquiring with lenders if your situation is unique. Providing documentation can help.

How To Check If A Waiting Period Applies To You

If you’re considering a home equity loan, the first step is to check if you need to complete a waiting period. Here are some tips:

• Review the date of any recent home purchase, refinance, HELOC or prior home equity loan. Lenders count waiting periods from those dates.

• Contact lenders and ask if they require waiting periods based on your home’s history. Provide dates of any recent transactions.

• Ask lenders how long their waiting periods are. Be sure to check if they make exceptions for extenuating circumstances.

• Review loan documents from prior transactions to check for waiting period policies. HELOCs in particular often outline future waiting periods.

• Talk to a loan officer early in the process to assess if waiting periods apply and how long they may be.

Being aware of potential waiting periods from the start allows you to plan appropriately and avoid surprises during the application process.

What Should You Do During The Home Equity Loan Waiting Period?

Once you know a waiting period applies, here are some things you can do to prepare for your future home equity loan:

• Save money for your downpayment. Lenders often require 10-20% down for a home equity loan.

• Keep up with payments. Make all mortgage, HELOC, credit card, and loan payments on time. This keeps your credit score high.

• Don’t take on new debt. Adding new balances will negatively impact your debt-to-income ratio.

• Start collecting documents. Gather bank statements, tax returns, income statements to speed up the application.

• Research rates and lenders. Compare different lenders and programs to find the best rate.

• Make home improvements. Increasing your home value can allow you to qualify for more equity.

• Pay down high interest debts. This helps improve your debt-to-income ratio.

Using the waiting period to prepare will put you in the strongest position to get approved once it ends.

Can You Ever Shorten The Home Equity Loan Waiting Period?

In most situations, you will need to complete the entire waiting period as required by your lender. However, there are a few cases where you may be able to shorten it:

• Request an exception for emergency expenses: If you have urgent medical bills or critical home repairs, lenders may shorten the waiting period. Proper documentation is key.

• Improve your financial profile: Paying down debts, increasing your income or credit score may allow some lenders to shorten the waiting period. Significant improvements are usually required.

• Applying equity established before transactions: In some cases, only newly accessed equity has a waiting period. You may be able to use equity established earlier.

• Providing updated home appraisal: If you can document your home value has already stabilized, a new appraisal may help shorten the waiting period with some lenders.

While waiting period exceptions are not guaranteed, it’s worth exploring these options with lenders if your situation is urgent or unique. Even a shortened period can help.

Final Thoughts On The Home Equity Loan Waiting Period

Understanding any required home equity loan waiting periods from the start allows you to plan your financing accordingly. While waiting periods are required to minimize risk for lenders, being aware of them ensures there are no surprises down the line.

Use the waiting time to improve your financial standing through saving, debt repayment, and boosting your credit score. This will help ensure approval once the waiting period has been completed.

Some exceptions to waiting periods do exist in special cases. But even a shortened waiting period requires extensive documentation and significant circumstances. Going in with full awareness of the process allows you to strategically time and structure your home equity loan application.

Frequency of Entities:
home equity loan waiting period: 20
home equity: 14
lender: 10
waiting period: 22
HELOC: 7
refinance: 5
equity: 21
loan: 24
mortgage: 2
home: 13