How to Get a Home Improvement Loan

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Get a Home Improvement Loan
Get a Home Improvement Loan

How to Get a Home Improvement Loan. If your house is several years old, it is probably time to make some major improvements. Updating items such as flooring, countertops and plumbing fixtures adds monetary and personal value to a house, but can be very costly. Here's how to get a home improvement loan and begin converting your house into your dream home.

Figure out what work needs to be done and have contractors provide estimates for completion. Determine the total cost of the remodel to determine how much money to borrow.

Gather documents and data required by lenders. Essential items include tax forms for the previous year or two, a credit history, employment verification documents, proof of supplementary income such as social security benefits, debt to income ratio and proof of income such as pay stubs.

Request a free credit report, which you are entitled to once per year according to federal law, and review it carefully. If you notice any discrepancies, file a dispute with the appropriate credit agencies.

Shop lenders for interest rates and reputation. Make sure to choose a reliable lender with an established history. If the terms of a loan look too good to be true, they probably are. If you apply for a loan online, make sure that your information is secure to avoid identity theft or personal monetary losses.

Decide between a home equity loan and a line of credit for home improvement. Both types of loans function as second mortgages, but the former loan is a lump sum of money to be repaid at a fixed interest rate, and the latter acts much like a credit card, with a revolving balance and repayment primarily on the principle at a variable interest rate.

Read all of the fine print before signing a loan agreement. If you have questions or concerns regarding the terms of a loan, consult an attorney or find another lender. The fees associated with professional advice or time to restart the lending process pale in comparison to becoming a fraud victim.

Make sure you can make the monthly payments on your second mortgage. If you default on your loan, you can lose your home. Spend time creating a budget to determine your monthly expenses before securing a loan.

Tips & Warnings

  • Make sure you can make the monthly payments on your second mortgage. If you default on your loan, you can lose your home. Spend time creating a budget to determine your monthly expenses before securing a loan.
  • Don't lose your home by falling victim to lending scams. If you have a low income, are disabled or eldery, you are at high risk. Get help from a trusted family member or hire an attorney to help you get a home improvement loan.

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