Many people make mistakes when applying for a home equity line of credit (HELOC). The good news is that, as with just about everything in life, being “forewarned is forearmed.” Read on for some valuable tips on what not to do when applying for a HELOC.
One common mistake people make when applying for a HELOC is choosing the wrong lender.This is oftentimes the result of not doing enough research on the various lenders out there who are vying for your business. If, for example, you do a lot of research and come up with some competitive rates, you can bring those to other lenders and see if they will beat those offers, or at the very least match them.
People will also get carried away when it comes to requesting a line of credit, and can end up borrowing more than they can afford. It’s easy to get caught up in imagining what you could do with more and more money, but it’s also not very realistic and can really come back to haunt you. When it comes to taking on more debt it’s probably a good idea to think small and think prudent.
Another important part of the application process that people can overlook is requesting a Good Faith Estimate from the lender. When you do, you’ll be getting what’s supposed to be an honest assessment of the total that you’ll be paying. That means you’ll be able to see all the fees – hidden and otherwise – that will come into play during the lifespan of your HELOC. It’s common that lenders will neglect to provide all details, so be sure to ask for it. You deserve to know exactly what you’re getting yourself into.
No one wants to make mistakes when it comes to their financial picture, especially in regards to a big financial commitment like a home equity line of credit. You’re putting your home down as collateral, after all, and if you get in over your head you could easily be heading towards foreclosure. Therefore, it’s imperative that you sit down with a financial advisor or trusted bank representative to go over your HELOC application in as much detail as possible.