What will a lender check when you apply for a home equity loan, and how long before you get the money?

Summary

A lender has to decide whether you can repay, and federal rules name eight things it must weigh, from income and existing debts to your credit history. Your home's value sets how much you can borrow, but it can't count as the income or assets that show you can repay. Expect a Loan Estimate within three business days of applying, and if the home is your principal dwelling, no money until a three-business-day cancellation window after signing has passed.

The eight factors

The ability-to-repay rule, 12 CFR 1026.43, applies to consumer credit secured by a dwelling. A home equity loan is covered, and a HELOC is expressly left out. The lender must make "a reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms," and it must consider your current or expected income or assets, your employment status if it relies on your job income, the payment on this loan, the payment on any other loan being made at the same time, mortgage-related obligations, your current debts including alimony and child support, your debt-to-income ratio or residual income, and your credit history.

The income-or-assets factor comes with a carve-out: it means assets "other than the value of the dwelling." Plenty of equity doesn't stand in for the ability to make the payment.

Where three lenders draw their lines

	Rocket Mortgage	Spring EQ	Regions Bank
Loan amounts	$45,000 to $500,000	$50,000 to $500,000	$10,000 to $500,000
Credit score	680, 700 or 740 depending on how much of the home's value you borrow against	"As Low As a 640 FICO"	Not stated
Borrowing limit	80%, 85% or 90% combined loan-to-value, by score tier	"up to 90% of your home's value"	85% on a second lien against a primary home (89% as a first lien), counting all debt on the home

Regions also requires a primary or secondary residence in a state where it has branches and at least $10,000 of equity, and it excludes investment properties and manufactured homes. Spring EQ takes no New York applications through its site. Rocket requires "full documentation of income and assets." Its page also gives three different debt-to-income limits: below 43%, a maximum of 45%, and 50% or below. Credit tiers are covered in more depth in the bad-credit article, and the loan-to-value math in the CLTV article.

The paperwork clock

The Loan Estimate has to go out "not later than the third business day after the creditor receives the consumer's application." Until you have it and say you want to proceed, a credit report fee is the only charge allowed.

Rocket says "a third-party appraiser will determine the value of your home." Don't count on a copy, though. Regulation B requires lenders to hand over appraisals and other written valuations for credit "secured by a first lien on a dwelling," and a home equity loan behind an existing mortgage is a second lien. Regions lends in either position.

After signing, a borrower whose principal dwelling secures the loan can cancel "until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last." Unless the borrower waives that right, "no money shall be disbursed other than in escrow" in the meantime. The CFPB's commentary adds that "a vacation or other second home would not be a principal dwelling," so a loan on one doesn't get this window. If the notice or disclosures were never delivered, the right lasts up to three years.

Rocket says funding can take "as little as 15 days," and Spring EQ quotes "as few as 11 days" counted from a complete application.

Sources

Written by Kaz (pen name). Figures are copied from providers' published pages on the dates shown. We have not used these products. Corrections: contact form.