How do I get a Home Equity Loan?

Applying for an equity loan or home equity line of credit is much less rigorous than applying for your first mortgage. Along with sufficient equity in your home--an appraisal will determine its value--your credit must be in good standing, your total indebtedness must meet qualifying ratios, and you must document your income to verify your ability to pay both loans.

Your home must yield an adequate amount between your loan balance and the value of your home. Lenders typically offer competitive market interest rates for a home equity loan (second mortgage) that, combined with your first mortgage, won't take your total home-secured indebtedness beyond 70% to 90% of the value of your home, leaving you with an equity cushion.

You can obtain equity loans with less or zero equity. Loans up to 125% or more of your home's value come with much higher interest rates, perhaps more fees and more stringent qualifying restrictions.