If only home improvement projects were as easy as they look on HGTV shows, then your primary concern would be whether the design recommended to you by the renovation company meets your expectations. Unfortunately, only a few people get an opportunity to appear on the shows and so they do not provide a true picture of a home improvement project.
Banks make it possible for thousands of people from all across the globe to make their homes better by providing home improvement loans. Applicants can use the credit to pay contractor fees and purchase the materials required for the project.
However, there is no guarantee that the bank will approve your application. There is a set of factors that are used to determine if an application is feasible. Here are proven tips on how to get a home improvement loan.
Evaluate your Equity
Most of the loans are dependent on the homeowner’s equity, which is the portion or percentage of the home that is already paid for. Home equity is used as collateral for the loan, but that is usually not enough to prove to the bank that you can repay the loan. You need to demonstrate beyond any reasonable doubt that you have the financial capacity to repay the loan and all existing debts on time. Once you do that, the final terms of the loan will be drafted, and you will be requested to read the document before signing it.
Note that the signed document can be presented in a court of law as evidence if you fail to repay the loan or any other tussle that requires the interpretation of the stipulated laws arise after you are awarded the credit.
Know your Credit History
Have you being repaying existing loans or debts? All the information about your past loans is captured and compiled by the credit bureaus. Whenever you apply for a home improvement loan, the bank will request for your credit report from the bank to evaluate your application.
A low credit score may result in your application being denied. The score is also used to determine the amount of money that should be loaned to you as it highlights your financial stability and ability to repay the loan. Other terms and conditions can also be based on the score.
Based on the above facts, you should strive to improve your credit score to increase the chances of your loan application been approved. A high credit score will also help you to get better terms and more capital to support the renovation project.
If you have a low credit score, you can still apply for a government loan or approach private lenders who are known for providing financial assistance to persons who have less than desirable credit score. Repaying the loan on time and abiding by all the terms and conditions will positively influence your credit score thereby increasing your chances of getting a loan from the bank.
Get An Appraisal
As mentioned earlier, home equity is used as collateral by most lenders. The bank will evaluate the total value of your home before deciding to either approve or reject your application. They will also use the value to know the ideal amount of money to loan you.
Getting an appraisal will prepare you well for the process. For example, the results of the assessment will also help you to know the amount of money that you should quote in your application.
Estimate the Total Cost of the Project
How much is it going to cost to replace the current roof, install solar panels, or redesign your kitchen? Consult contractors to get an estimate of the total cost of the renovation project before filling the loan application documents. You should get estimates from professionals who have been in business for a while now to avoid under or over-quoting.
You may encounter roadblocks along the way that will force you to spend more money than what you had indicated in the budget. Therefore, it is wise to make sure that you factor in such unforeseen expenses in your budget to avert financial challenges.
More importantly, the estimates will help you to know if you can use a portion of your savings to pay for some of the renovations in cash. This could reduce the loan amount that you need and save you money in the end.
Contact Get Hearth to get more advice on how to get a home improvement loan. This team of experts will evaluate your expectations, financial capability, and the various financing options available to help you make the right decision. They can also give you additional tips on how to manage and keep track of expenditure as the project progresses.
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