How Long Does it Take to Get a Home Equity Loan Approved?

Taking out a home equity loan can be a great way to access the equity you’ve built up in your home for large expenses, debt consolidation, or home improvements. But before you can access those funds, you’ll need to go through the home equity loan application and approval process. So how long does it actually take to get approved for a home equity loan? Let’s take a closer look.

The Home Equity Loan Application Timeline

The total time it takes to get approved for a home equity loan can vary quite a bit, but the general process typically follows these steps:

1. Prequalification (1-3 days)

Before formally applying it’s a good idea to get prequalified by submitting basic information to a lender. This usually only takes 1-3 days and will let you know how much you may be able to borrow.

2. Formally Apply (1-2 days)

Once prequalified, you can choose a lender and formally apply by providing more detailed financial information and paperwork. This step may take 1-2 days.

3. Home Appraisal (3-10 days)

The lender will order a home appraisal to determine your home equity amount. Appraisals usually take 3-10 days to be completed and submitted.

4. Underwriting and Verification (7-21 days)

The lender will then verify all your financial information through underwriting. This in-depth review makes sure you qualify and can take 1-3 weeks.

5. Loan Approval (1-2 days)

Once underwriting is complete, the lender can officially approve your loan, typically within 1-2 days

6. Closing (1-2 days)

Finally, loan documents are signed at closing, which takes 1-2 days. Once closed, funds are dispersed to you shortly after.

So in total, you can expect the home equity loan approval process to take 2-6 weeks on average. However, the specific timeline can vary quite a bit depending on your financial situation.

Factors That Impact the Home Equity Loan Timeline

While the basic home equity loan process takes 2-6 weeks, there are several key factors that can impact exactly how long it takes for you to get approved:

• Credit score – The higher your credit score, the faster the process since you likely qualify for better rates. Those with lower scores may need extra time for approval.

• Loan amount – Smaller loan amounts can often be approved more quickly than larger loans that require more documentation.

• Employment status – Having stable employment history speeds things up. Those that are self-employed or have gaps in employment may need more time.

• Income and debts – Your debt-to-income ratio can impact qualification if too high. Providing thorough income documentation is key.

• Home appraisal – An appraisal that comes in low can delay or even derail approval. Cleaning up your home before listing helps.

• Lender workload – Lenders with high volumes may take longer than smaller lenders with less traffic.

• State laws – Some states require more disclosures and longer waiting periods, extending timelines.

As you can see, the health of your finances and choice of lender play a big role in expediting or delaying approval. Doing what you can to better your financial profile pays off.

Tips for Getting Approved Faster

If your goal is to get approved for a home equity loan as quickly as possible, here are some helpful tips:

• Get prequalified first – Being prequalified shows lenders you’re serious and lowers the risk for them.

• Choose your lender wisely – Opt for lenders known for fast turnaround rather than the cheapest fees.

• Gather all paperwork – Having tax returns, pay stubs, and statements ready avoids delays.

• Provide prompt explanations – Quickly explain any red flags underwriters find to keep things moving.

• Clean and declutter your home – A higher appraisal means faster approval.

• Stay on top of communications – Reply right away to any requests to avoid slowing things down.

• Be flexible on closing date – Accept the first available closing date you’re given.

• Avoid new credit – Making big purchases before approval can raise red flags.

With some preparation and diligence on your end, you can often reduce the home equity loan approval timeline by a week or more.

How Long Do Home Equity Loans Take to Fund?

Once approved and your loan closes, you’re probably eager to actually get your hands on the funds. Here’s an overview of the home equity loan funding timeline:

• 1-3 days after closing – Your loan is officially closed once documents are signed by you and the lender. Funds cannot be dispersed until the closing process is fully complete.

• 3 days after closing – Most states have a “right of rescission” period where you can change your mind. Funds will be held until this 3 day period passes.

• 3-5 days after closing – After the right of rescission period, funds are finally cleared for release. Disbursement time can vary by lender.

• Same day as disbursement – Once disbursed, the funds should hit your bank account right away, either the same day or next day.

So in total, you can expect to wait 1-2 weeks after getting approved to actually receive your home equity loan funds, depending on your lender. The wait is usually worth it to get access to your home’s equity.

Weighing the Pros and Cons

While home equity loans allow you to tap into your equity, they aren’t right for everyone. Here are some key pros and cons to consider:

Pros

• Access large lump sums of cash
• Often have lower interest rates than alternatives
• Interest may be tax deductible (consult a tax pro)
• Versatile for many uses like debt consolidation, renovations, etc.

Cons

• Closing costs and fees reduce amount borrowed
• Monthly mortgage payment increases
• Risk of foreclosure if payments not made
• Reduces your remaining home equity

As you can see, home equity loans offer homeowners a lot of financial flexibility but shouldn’t be taken lightly. The application process gives you some time to think it over.

Common Home Equity Loan Questions

If you’re considering a home equity loan, here are answers to some common questions:

How much can I borrow?

• Lenders will typically let you borrow up to 80-90% of your home equity. First mortgages and financial profiles also factor in.

What credit score is needed?

• Minimum scores are often around 620, but 720+ is ideal for the best rates and fastest approval.

How long is the repayment term?

• Term lengths usually range from 5 to 30 years. 20-25 years is most common.

Can I pay it off early?

• Yes, you can pay off a home equity loan early with no prepayment penalties. This saves on interest.

The Bottom Line

Getting approved for a home equity loan takes an average of 2-6 weeks but can sometimes be quicker with the right preparation and finances. While not the fastest source of financing, home equity loans provide you decades of time to tap into the hard-earned equity within your home. Just be sure to carefully consider both the benefits and risks before moving forward.