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How To Qualify for a HELOC in Washington and Oregon







how-to-qualify-for-a-heloc-in-washington-stateA home equity line of credit, or HELOC, is a unique type of loan that allows you to borrow against the equity in your home. Many borrowers seek out a HELOC because of its flexibility. The funds can be used for numerous purposes, common uses including, home repairs, debt consolidation, and so on.

A HELOC is a good option if you don’t need a large lump sum of funds at once. When you open the line of credit, you’ll have a set period of time to draw from the funds. You can use as much or as little as you need during this time, and you don’t have to pay it back until the draw period ends and the repayment period begins. Since you only pay interest on the amount of funds you actually draw, this home equity loan option can be ideal for expenses that only require a little money at a time.

There are specific requirements in order to qualify for the best HELOC rates in Washington and Oregon. It’s important to know what a HELOC is before applying. If you’re considering opening a home equity line of credit, read on to explore if this is a good option for you.


General HELOC Qualification Requirements

As with any type of loan, good financial credit is necessary. This is displayed by meeting the following criteria.

Credit Score

When you apply for a HELOC, the lender will examine your credit history and credit report. This helps the lender determine if you qualify for a HELOC loan.

To qualify for a HELOC, your credit score should be in the high 600s or in the 700s. You can check your credit score for free before you apply. If you do not qualify, here’s information to help you become credit-ready.

Debt-to-Income Ratio

Also known as DTI, the debt-to-income ratio refers to the amount you owe in monthly debt versus your income. It shows whether you’re prepared to take on more debt.

To qualify for a HELOC, your DTI must meet certain thresholds. Exact requirements vary depending on the lender.

You also should have a steady, reliable income. When you apply for a HELOC, you’ll need to provide proof of income, usually with tax returns or W-2s.

Home Equity

Since you intend to borrow against your equity, you’ll naturally need to have a sufficient amount built up. Typically, you’ll need at least 20 to 30 percent of your home’s value in equity to qualify for a HELOC.

In line with this, lenders will calculate your loan-to-value ratio (LTV). That indicates the amount remaining on your mortgage balance divided by your home’s current value. That means the balance of your mortgage plus the amount of your HELOC would need to total less than the lender’s threshold of your home’s total value for you to qualify.


What Determines HELOC Rates in Washington and Oregon?

HELOC rates vary from lender to lender, but overall, they tend to be lower than rates of personal loans or credit cards. HELOC rates typically are adjustable. However, some lenders offer an initial fixed-rate option, which may last for the first six months.

There are also ways to ensure you get the best rate possible. Determining factors include:

  • Amount of equity in your home—the more equity you’ve built up, the better; this may lead to better interest rates.
  • Current market conditions in Washington and Oregon—and the country.

Applying for a HELOC

If you meet the above qualifications, congratulations! You are ready to take the next steps toward applying.

First, decide how much you intend to borrow. Then, compare different lenders. Keep in mind that Washington and Oregon HELOC rates change, so stay up to date on the current rates of each lender. Compare terms and fees as well.

These days, you can conveniently apply for a HELOC online. Most financial institutions, such as Riverview Bank, include this option on their websites. Of course, if you’d prefer to apply in person, that option is also available.

Necessary Documents

When you apply for a HELOC, you’ll need to provide some important documentation. This includes:

  • Proof of identity, including a Social Security number and a government-issued photo ID.
  • Income documentation, typically including federal tax returns, pay stubs, and/or W-2 forms. You may be asked for W-2s for the past two years. Pay stubs or bank statements should usually be from the past 30 days.
  • If applicable, provide documentation about benefits like Social Security, disability, or retirement. This includes verification letters, retirement award letters, benefit statements, 1099 forms, or other sources of income such as rental agreements.
  • Documentation related to your home and the estimated home value. This can include homeowner’s insurance, property tax bills, and the most recent mortgage statement.

These documents allow lenders to verify your identity, income, and financial history. Whether you apply online or in person, you should have these gathered ahead of time so you’re adequately prepared. The exact documentation requirements may vary depending on the lender. It’s important to double-check before applying.

Home Appraisal Process

A lender will most likely require an evaluation or appraisal for you to qualify for a HELOC. This determines the current value of your home and helps them determine how much equity you have. Appraisals can be done in person. There are also drive-by or automated/computed appraisals.

Closing a HELOC

If you qualify for a HELOC, this is the final step before receiving availability to the funds in your line of credit. This usually includes signing an agreement. There are usually closing costs involved, though the exact amount varies. Once closed, the draw period begins, and you can start using your funds. And once you have a HELOC, it may be tax deductible.

To get the most out of a HELOC, make sure to partner with a financial institution you can trust. With over 100 years of experience and branches all over the state, you know you can trust Riverview Bank. Learn more about our HELOC options, including terms, fees, and current rates. If you have additional questions about HELOC rates and requirements, stop by a Riverview branch.