If you need to borrow money from your home, you should know that it can take between two to six weeks to close on a home equity line of credit (HELOC). In fact, this is the case with most other home loans, including cash-out refinance mortgages. If you’re wondering how long does a HELOC takes to close — and how to speed up the process! — keep reading below.
This is because lenders need time to review the necessary documentation to ensure that the home is in acceptable condition and that you can repay the loan. This can include third-party items such as inspections and a home appraisal report, as well as your own credit and income documentation.
What steps are involved with getting a home equity line of credit?
If you want to get a HELOC and understand why it can take several weeks to get a home equity loan, we’ll go through the steps required of most lenders. Different lenders can have slightly different processes, but these are the most common items you’ll see.
Submit an application and provide the required documents (1 to 3 days)
After you submit a home equity loan application, it will be reviewed by the lender to determine what paperwork it will initially require. It can take between 1 and 3 days to hear back after you submit an application. You should expect to provide income documents such as recent pay stubs, W2s, and tax returns if you are self-employed.
You may also need to provide bank statements as proof of ability to pay closing costs, as well as explanations for recent applications from your credit history. If you have obtained new debt that is not yet showing on your credit report, you’ll need to provide a copy of the most recent loan statement.
Appraisal and third-party items are ordered (1 to 2 weeks)
Once you have provided the lender with the initially requested documentation, it will order an appraisal and certain third-party items such as a title search. The appraisal is what typically takes the longest amount of time. An appraiser will inspect your home, and then complete a report to support an opinion of value based on recently sold homes with similar characteristics in your neighborhood. This report is used to determine how much equity you have in your home.
Home equity loans also involve a title search to verify legal ownership of the property. The speed of the title search process is dependent on the county in which your home is located. Some title searches can be done as quickly as 24 hours, while others can take weeks, especially if discrepancies are found.
Less common items that can be requested depending on your circumstances include inspections for septic systems, private wells, home appliances such as water heaters, and inspections for foundational concerns.
Underwriting review (1 day to 1 week)
Underwriting is the process in which a lender reviews your loan documentation in detail and makes a decision on the loan, such as your gross monthly income, credit history, and credit score. Your loan can be approved, conditionally approved, suspended, denied, or counter-offered.
- Approved: You have been approved for the terms you requested.
- Conditionally Approved: Your loan will most likely be approved, pending verification of items unlikely to impact the loan decision.
- Suspended: The lender needs clarification on a major item to determine the next steps.
- Counter-Offered: The lender can issue a loan to you, but the terms will differ from what you requested.
- Denied: The lender is unable to issue you the loan.
The underwriting process usually takes several days to one week or more, depending on how many other applications the lender has received. Underwriting usually takes place when the lender has received all third-party reports, inspections, and documents requested from you.
It is common for lenders to ask for clarification or explanations on any discrepancies it discovers during this process. Some common examples can include unusual deposits in a bank account, fluctuating income, variations in names or addresses, or terms of newly opened accounts not yet appearing on your credit report. Be prepared to provide documentation to support any explanations you provide.
Loan signing is scheduled (1 to 3 days)
Once the lender has confirmed you meet its eligibility requirements and can get a HELOC, it will send final loan documents to a notary and have them contact you to schedule a meeting. This is necessary to verify the identity of all individuals signing the paperwork. The notary should advise you on what type of identification you’ll need to provide, which may include photo IDs such as state IDs, driver’s licenses, and passports.
Upon conclusion of the loan signing, the notary will provide you with a copy of the documents and will send the originals back to the lender for its final review.
Signed loan documents are reviewed by the lender (1 to 3 days)
Loan documents are typically sent by the notary to your lender via certified overnight mail. Once your lender receives the documents, it will conduct a review to ensure there are no missing signatures and that everything was properly signed and dated. Issues at this stage are uncommon, but most errors can usually be quickly fixed without requiring any in-person meetings.
The loan is funded (1 to 2 days)
Once the lender has reviewed the loan documents, your loan is ready to be funded. This typically occurs within 24 hours. As many lenders provide online access to banking and lending products, you should be able to log in to your account online and see your new HELOC ready for use.
How can I get a home equity loan more quickly?
To help you get through the home equity loan process as quickly as possible, here are some tips to follow:
Only provide what you’ve been asked for
If the lender has requested two pay stubs, provide only two. If it has requested one month of a bank statement, provide only one month. Giving the lender more than what it has asked for can cause delays because it requires the company to sort through and review the documentation. Also, any discrepancies found on the additional documents will need to be addressed.
Similarly, if a lender has asked for all pages, you should include all pages, even if the pages are blank. This is commonly seen on bank statements where some pages may be left intentionally blank. However, without that page, the lender will have no way of knowing if those pages were omitted because they were blank, or if there is transaction history or other information missing. This especially rings true if you are getting a bank statement loan.
Improve your credit
If you have a good credit score, you’ll not only have an easier time meeting the lender’s underwriting requirements but also reduce the likelihood that they will need additional time in counter-offering or restructuring your loan. Borrowers with good credit scores typically have low credit card debt, which helps with the debt-to-income ratio needed to qualify.
Make sure you provide legible copies
Before you send documents to your lender, make sure it is legible. Ensure no pages are missing and nothing is cut off at the top, bottom, or sides of the page. Most lenders will also reject documents if information (such as account numbers) is intentionally omitted or blurred out.
Schedule the appraisal as soon as possible
This is the step that typically takes the most amount of time. If you want to be proactive, you can contact the appraisal management company responsible for locating and scheduling an appraiser for your home. Doing so can save you 1 to 2 days.
Provide the appraiser with your home’s information
Appraisers typically conduct their own research to determine your home characteristics, but you can provide them with the information upfront or tell them where it can be found.
For instance, if you recently finished home improvements, it’s a good idea to provide your appraiser with information on relevant inspections and permits. Appraisers can then include this information in the appraisal report it delivers to your lender as proof that your home is free of any health or safety hazards and that improvements to your home were done to code.
Additional information can include contact information for your homeowner’s association, the amount of HOA dues, and copies or reports of third-party inspections.
Tidy up your home before the appraiser visits
It’s a good idea to prepare for your appraiser’s visit. The report created by your appraiser will contain pictures of your property. The lender will review these pictures for any potential health or safety hazards. Ensuring your home is clean on the interior and exterior can reduce the likelihood that your lender will have concerns over something that could simply be an aesthetic item.
Give the notary proper identification
In order for a loan signing to be conducted for a home equity loan, you must first provide the notary with acceptable identification. Requirements can be strict, so you’ll need to follow the notary’s instructions precisely when you are contacted for scheduling. Without proper identification, you will not be allowed to sign loan documents.
Common issues include incorrect documentation being provided, expired documentation, or variations in names. If you have a middle or hyphenated name, it’s a good idea to check with the notary if it will be accepted before you meet with them.
How long does it take for other types of loans?
If you need funds more quickly than a home equity line of credit, here are a few alternatives you can consider. Each can help your financial situation, whether for debt consolidation, get a better interest rate, or help pay for home renovation projects.
- Credit cards: With good credit, getting approved for a credit card instantly is possible. Some companies may even ship the card to you via certified overnight mail so that you can begin using it more quickly. A common credit limit will range from $10,000 to $25,000, although it is possible to get approved for more. Some credit card issuers may also provide an introductory rate of 0% for a limited period of time.
- Personal loans: You can get a personal loan from a bank, credit union, or online lender. You can get a fixed-rate loan as low as around 7.99%, and the approval process usually takes several days.
- Personal line of credit: A line of credit gives you the flexibility to draw funds only on an as-needed basis. You can get approved in as little as several days. Common credit limits for this are in the range of $5,000 and $20,000, with variable interest rates typically less than 10%.
If you need funds fast, avoiding a mortgage loan, such as a cash-out refinance is a good idea. This is because most financial institutions require many of the same steps described above to get a HELOC.
How long does a HELOC take?
If you’re looking to borrow money, getting a home equity line of credit is not typically a quick process, and you should expect anywhere from two to six weeks before your loan is approved and you are given the ability to draw funds. However, there are things you can do as a borrower to make sure the process goes smoothly. If you need funds more quickly, there are alternative financing methods you can consider that also have competitive rates. Make sure to shop multiple lenders, as some are faster than others.