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Home equity loans allow homeowners to borrow against the equity in their homes. Equity is the difference between your home’s value and what you owe on your mortgage. Home equity loans are popular among borrowers who want to use the funds for home improvement projects or to pay off or consolidate high-interest debt.
Forbes Advisor compiled a list of home equity lenders that excel in various areas, including offering low fees, low loan costs, convenience and flexibility, so there’s something for people with different goals and financial needs.
Less than three days
Lower than the national average
30 to 40 days for purchase closing
Established in 1935, PenFed is one of the country’s largest member-owned credit unions. PenFed has an open charter, which means no military affiliation is required. To join, you must open and maintain a share (savings) account with at least $5. This isn’t a membership “fee,” it’s the member’s ownership share, and the requirement is the same for every member.
PenFed operates in all 50 states, Washington, D.C., Puerto Rico and Guam. The lender has a handful of branch locations in Maryland, Virginia and Washington D.C., but members also can apply online.
Mortgage borrowers will not have to pay any lender fees; they’re just responsible for third-party fees such as appraisal, title, credit report and any other service required to process the mortgage.
Although PenFed historically averages 30 to 40 days for purchase closings, the lender says it will make an effort to close in a shorter time frame, if needed.
The Mortgage Member Benefits Program is a simple, three-tier lender credit for up to $2,500. The amount you save is based on your loan amount, so the bigger the loan, the more the savings.
Available in All 50 States
Although you can apply online, PenFed also offers branches in Maryland, Virginia and Washington, D.C.
How to Apply
Borrowers can begin their application process online. Customer support by phone is available Monday through Friday from 7 a.m. to 11 p.m. ET, Saturday from 8 a.m. to 11 p.m. ET and Sunday from 9 a.m. to 5:30 p.m. ET.
Speed
Loan preapproval takes less than three days. The average closing time is 35 days, which is shorter than the industry average. In some cases, closing can be as short as 11 days.
Credit Requirements
Borrowers must have a minimum credit score of 620 or higher for conventional and VA loans. For jumbo loans, the minimum credit score is 700.
Loan Types Offered
PenFed offers fixed conventional, jumbo and VA mortgage loans as well as home equity loans and refinancing.
Loan Type | Yes | No |
---|---|---|
Conventional | ✓ | |
FHA | ✓ | |
VA | ✓ | |
USDA | ✓ | |
Jumbo | ✓ | |
ARM | ✓ | |
Home equity loan | ✓ | |
Specialty | ✓ |
20 to 30 minutes
Lower than the national average
Average closing time is 45 days
PNC Bank operates in all 50 states and provides a wide range of mortgage products, including specialty loans for low- and moderate-income borrowers.
PNC also offers an innovative online experience called Home Insight, which provides a deep dive into the homebuying process, enabling customers to determine the mortgage payment they can afford and start shopping for homes with real-time rate quotes and loan products. It also allows customers who have applied for a loan to follow along with the approval process and upload supporting documents. In addition, the customer can invite real estate agents into the process to monitor progress.
Home Insight combines a home affordability analysis, a monthly payment estimator that accounts for insurance and taxes and the ability to search for available home listings. It also connects unique budgets, real-time rates and loan products with a real estate listings search to help prospective home buyers better understand how much house they can afford.
PNC also offers a full digital pre-approval application, where borrowers may apply online and receive approval in a matter of minutes.
Available in All 50 States
PNC has branches for borrowers more comfortable with a brick-and-mortar experience in the following states: Alabama, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia and Wisconsin.
How to Apply
Borrowers can apply online or in person at a bank location. Customer support by phone is available Monday through Thursday from 8 a.m. to 9 p.m. ET, Friday from 8 a.m. to 5 p.m. ET and Saturday from 9 a.m. to 2 p.m. ET.
Speed
Preapproval takes between 20 to 30 minutes. The average closing time is 45 days, which is about the industry average. In some cases, closing can be as short as 30 days.
Credit Requirements
Borrowers must have a minimum credit score of 620. For jumbo loans, the minimum credit score is 700.
Loan Types Offered
Loan Type | Yes | No |
---|---|---|
Conventional | ✓ | |
FHA | ✓ | |
VA | ✓ | |
USDA | ✓ | |
Jumbo | ✓ | |
ARM | ✓ | |
Home equity loan | ✓ | |
Specialty | ✓ - Community (No PMI loan), Medical Professional Loan |
Preapproval letter takes 10 days to receive
Lower than the national average
30 to 45 days
Bank of America is a big bank lender that offers mortgage and refinance loan products, along with full banking services. There are more than 5,000 branch locations in the U.S., in addition to its online mortgage options, which includes the Bank of America Digital Mortgage Experience. This provides customers with online applications, electronic signatures for documents and online rate locks. Borrowers also can connect with a lending specialist online.
Bank of America offers lower-than-average mortgage rates and the convenience of applying in-person or online. Their Affordable Loan Solution mortgage requires a low down payment of just 3% and no private mortgage insurance, which can save budget-minded borrowers hundreds of dollars per month.
For existing customers, there are several discounts available, including a $600 closing-costs discount.
Available in All 50 States
There are no geographic restrictions for getting a Bank of America home mortgage.
How to Apply
Borrowers can apply online or in person. Bank of America operates in all 50 states. Borrowers can schedule an appointment online.
Customer support via phone is available Monday through Friday, 8 a.m. to 10 p.m. ET and Saturday 8 a.m. to 6:30 p.m. ET.
Speed
Bank of America’s mortgage preapproval time takes 10 days, which is a lengthy amount of time compared to other lenders. A long preapproval time is a disadvantage in a competitive seller’s market, where buyers are bidding against several other people and need to be ready with financing in order to make an offer.
The lender’s average closing time is between 30 to 45 days, which is about the industry average.
Credit Requirements
Bank of America requires a minimum credit score of 620.
The lender considers alternative credit data, such as rent and utility payments, when reviewing mortgage applications. Alternative credit data takes into account payments you make that are not traditionally included in credit reports. This can help borrowers who might not have a long credit history or had a prior bankruptcy show a good track record with on-time payments in areas that are not usually counted in traditional credit data.
Loan Types Offered
Bank of America offers fixed- and adjustable-rate conventional and jumbo mortgages (ARMs), FHA loans and the Affordable Solution Mortgage, which requires just 3% down and no private mortgage insurance. The lender doesn’t offer USDA loans.
Loan Type | Yes | No |
---|---|---|
Conventional | ✓ | |
FHA | ✓ | |
VA | ✓ | |
USDA | ✓ | |
Jumbo | ✓ | |
ARM | ✓ | |
Home equity loan | ✓ | |
Specialty | ✓- Affordable Solution Mortgage |
15 minutes
Within 1 to 3 basis points above or below the national average
20 days
LoanDepot is one of the largest non-bank mortgage lenders in the U.S., with more than 150 branches across the country and a robust online presence. Its loan products include conventional mortgages, government-backed loans and refinances.
Customers who use the lender’s Mello Smartloan online technology can expect to reduce their closing time by 17 days by reducing paperwork and digitally connecting and verifying assets, income and debt. Additionally, Mello Smartloan can digitally conduct title clearance, which is often one of the more time-intensive steps of the underwriting process. Another benefit of this technology is that it also determines whether some borrowers can waive the appraisal requirement, which can shave time and a few hundred dollars off the cost of your mortgage.
Available in All 50 States
Borrowers can apply online or in the more than 150 branch locations in the U.S. LoanDepot currently has origination centers in Arizona, Tennessee and two in California and is currently licensed in 50 states.
How to Apply
LoanDepot customers can apply online for a mortgage. Once they submit their application, a loan officer will call them to go through the next steps, which include submitting income documentation and personal identification.
Customer service hours are fairly flexible on weekdays, from 8 a.m. to 10 p.m. ET Monday through Friday and Saturday from 11 a.m. to 3 p.m. ET.
Speed
LoanDepot’s mortgage preapproval time takes about 20 minutes for borrowers who are not required to supply additional information.
Borrowers who use their Mello Smartloan technology, which is said to cut down on the amount of paperwork applicants are required to submit and— in some cases—even eliminates the need for a home appraisal, can shorten the closing process by up to 17 days.
Credit Requirements
LoanDepot requires a minimum credit score of 620 for conventional and VA home loans, which is the average requirement for most lenders. For FHA mortgages, the credit requirement is less stringent, dipping to a 580 minimum. Finally, jumbo borrowers must have a minimum 700 credit score.
Loan Types Offered
LoanDepot offers fixed-rate mortgages, adjustable-rate mortgages (ARMs), FHA loans, jumbo loans, VA loans and 203(k) loans. LoanDepot does not offer USDA loans.
Loan Type | Yes | No |
---|---|---|
Conventional | ✓ | |
FHA | ✓ | |
VA | ✓ | |
USDA | ✓ | |
Jumbo | ✓ | |
ARM | ✓ | |
Home equity loan | ✓ | |
Specialty | ✓ |
24 hours
Lower than the national average
27 to 30 days
SunTrust Mortgage does an all-around good job at offering low rates, low fees and fast pre-approval times for its mortgage customers, all features that are sought after when looking for a home loan.
Borrowers also can get a preapproval letter within 24 hours, which is quite fast and convenient—especially if you’re ready to shop for homes and make an offer.
In 2019, SunTrust Mortgage Banks Inc. and BB&T Corp. merged to form Truist Financial Corp. SunTrust Mortgage will continue to use its name and branding on its website, branch locations and ATMs at least until 2021.
Available in Most States
SunTrust Mortgage is available online in all states except Hawaii, Alaska, Oregon and Arizona. There are branch locations in Alabama, Arkansas, District Of Columbia, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee and Virginia.
How to Apply
Borrowers can apply online or in person if branch locations are available. Customer support is available by phone Monday through Friday, 8 a.m. to 8 p.m. ET and Saturday 8 a.m. to 5 p.m. ET.
Speed
Preapproval times are pretty fast. Borrowers can count on getting preapproved within 24 hours.
Credit Requirements
SunTrust Mortgage requires a minimum credit score of 620 for all loans.
Loan Types Offered
SunTrust Mortgage offers mortgages for buyers and refinancers. Its product line includes fixed and adjustable-rate (ARMs) conventional and jumbo mortgages, FHA, USDA and VA loans, as well home equity loans.
Loan Type | Yes | No |
---|---|---|
Conventional | ✓ | |
FHA | ✓ | |
VA | ✓ | |
USDA | ✓ | |
Jumbo | ✓ | |
ARM | ✓ | |
Home equity loan | ✓ | |
Specialty | ✓ - Doctor Loan Program, Affordable Financing Loan, Premier Loans for Professionals |
There are a few ways you can access the equity in your home without selling it:
There are key differences between these three loan types, so it’s important to understand what they are so you can choose the loan that best fits your financial needs.
Borrowing against your equity can be set up as a loan (home equity loan)—where you receive one lump sum and repay it with interest over time—or a line of credit (home equity line of credit, or HELOC) that you can access over a certain period of time.
A home equity loan is a good option if you know how much you need to borrow, if, for example, you’re consolidating debt. A HELOC is a good option for uses like construction or home renovations, as these costs can change over time. The HELOC allows you to use as much or as little of the credit as you want and you can continue to borrow as you pay down the principal. Both of these options require you to get a second mortgage on your house.
If you’re still paying off your primary mortgage, then this new mortgage would be in the second position. This means it’s second in line to being paid back when you sell your house or if your home were to go into foreclosure. For this reason, home equity loans and HELOCs are often harder to qualify for than cash-out refinancing.
A cash-out refinance replaces your original mortgage with a new, bigger one. Since you’re borrowing money against the equity, that amount is rolled into your new mortgage. So you would pay your principal balance and your equity loan amount in one payment. Lenders loosen credit requirements on cash-out refinances because they’re in the first position—or first in line—to get paid back, which is optimal.
Like a mortgage to purchase a home, equity borrowing involves shopping for interest rates.
Since comparison shopping often leads to lower interest rates, be sure to collect as much information as you can. You can use a loan estimate from one lender to potentially negotiate a lower rate with another lender.
Forbes Advisor reviewed 12 mortgage lenders that do business both online and in person throughout the United States. The lenders we reviewed represent some of the largest mortgage lenders by volume, which include banks, credit unions and online lenders.
Our scoring methodology included capturing more than 10 data points, which covered interest rates, lender fees, discounts, accessibility and borrower requirements.
The best home equity loan lenders excelled in areas that are historically important for this group, including speed, low lender fees and low interest rates.
The following is the weighting assigned to each category:
Specific characteristics taken into consideration within each category include APR, average interest rate, origination fees, minimum credit score requirements, discounts and customer service availability.
We also offered bonus points up to 5% of the score when a lender considers alternative credit data.
Home equity is the difference between what you owe on your mortgage and the current appraised value. If your house was appraised at $300,000 and you owe $100,000, you have $200,000 in equity.
If you haven’t had your home appraised since you renovated it or property values have gone up in your area, it might be worthwhile to get an appraisal before you apply for equity financing. If your home has increased in value, you’ll have more equity to draw from and potentially a better chance of getting approved for a loan.
A home equity loan is a type of financing that uses your equity as collateral. The lender would decide how much to lend based on how much equity you have in your home. Most lenders will not lend you the full amount of your equity, as this increases their risk.
If approved, the lender will create a second mortgage and cut you a check for the full loan amount. Repayment works like any other installment loan, meaning you would make equal monthly payments over time until you pay off the loan balance.
A home equity line of credit or HELOC is a loan that uses your home’s equity as collateral, but instead of issuing the loan in a lump sum, the lender would extend a line of credit based on your equity.
In that way, HELOCs are similar to credit cards. Like a credit card, you have a certain spending limit and when you reach that threshold your credit stops.
The period when you can spend money through your HELOC is called the draw period. After the draw period ends, you can longer access the credit, and you enter your repayment period. HELOC draw periods are usually between five and 10 years.
Lenders differ in how much they will lend as a percentage of the total equity. Part of how much you qualify for also depends on your credit profile. Some lenders will loan up to 85% or even more of a borrower’s equity if you have an excellent credit score and a strong financial profile.
Natalie Campisi is a Los Angeles-based reporter who covers mortgages and housing news for Forbes Advisor. Previously, she was the senior mortgage reporter and analyst for Bankrate. She’s also covered unemployment on Capitol Hill and news stories for the Tampa Tribune. Her work has appeared in publications such as CNBC, The Chicago Tribune, and MSN.