how to get a home improvement loan

Repairing and remodeling your home can be an exciting, albeit stressful experience. There’s a lot to consider along the way. From managing contractors, handling projects and of course the all important financing, it can all be overwhelming. Obtaining a personal loan can be a great way to finance your home improvement projects. You may be wondering how to get a home improvement loan, and it’s not as difficult as you might think. Learn more about how a home improvement loan will help you make your house into a dream home. 

How Do Home Improvement Loans Work?

When considering unsecured personal loans, a home improvement loan is a desirable loan offered by lenders and is a great way to obtain financing for a remodeling or home renovation project. There are many different types of personal loans on the market, so it’s wise to consider the loan terms and interest rates when comparing options. 

Still asking yourself what is a home improvement loan? Read on to learn more. 

What Qualifies as a Home Improvement Loan?

A home improvement loan is an obvious choice for funding a remodeling project, but it’s not the only choice. There are many different kinds of loans and financing options available, each with its own advantages and disadvantages. 

Using Savings

Of course, the most affordable way to pay for home improvement projects, both planned and unexpected is with your savings. When you pay for your remodels upfront with cash, you’ll avoid paying interest, and will limit overall risk. However, access to liquid cash is not something that all homeowners have available to them. Luckily, there are other options available. 

Credit Cards

When your projects are minor or come up unexpectedly, relying on credit cards can be a hassle-free way to access funds. But most credit comes with higher interest rates and lower limits, which means you need to pay it off quickly to ensure you don’t blow your budget. 

Refinance Your Mortgage

Some homeowners may look into a cash out refinance to access the existing mortgage in their home. This method replaces your existing mortgage with a new one, complete with a new interest rate and terms. A cash out refi only makes sense when interest rates are low when you have ample equity in your home and you plan on sticking around long enough for the closing costs to make sense financially. It’s important to crunch the numbers to make sure this option makes sense in the long run.

Home Equity Loan

Much like a refinance, home equity loans rely on the existing value in your home. This type of second mortgage pays out a lump sum payment for the appraised equity using your home as collateral. This type of loan not only relies on equity, but market value, and requires borrowers to take the entire amount of equity as a loan. 

Home Equity Line of Credit 

Home equity lines of credit (HELOC) also rely on a home’s current equity but offer homeowners the flexibility to borrow money in varying amounts. This lets you decide how much or little you’d like to borrow against your home. HELOCs usually come with variable interest rates, which can go up and down based on the market. 

Home Improvement Loan

One of the easiest and most flexible ways to finance your home improvement project is with a home improvement loan. It’s right there in the name. Available in various amounts, terms, and rates, this type of personal loan allows homeowners the freedom to pick the perfect situation for their unique project. 

Is It Difficult To Get a Home Improvement Loan?

Getting a home improvement loan is not as complicated as many other funding options, but there are some things you can do to prepare before you apply. As with any type of loan, the better the credit you have, the better rates you’ll receive. Even when you apply online, you’ll need to have access to some of your financial information, including how much you’d like to borrow and your credit score.

Tips For Getting a Home Improvement Loan

In order to get approved for your home improvement loan, there are a few steps to get ahead of the pack. 

Understand How Much You Need

Before you start the loan application process you should determine how much money you’d like to borrow. This is where your budget will come in handy. The size of the job, materials, installation costs and more, will all help you gauge the proper loan amount to seek. Make the best estimations of your full project cost by examining the average cost of home improvement projects

Check Your Credit Score

If you don’t already, it’s wise to keep a close eye on your credit score as it changes over time. FICO breaks down its credit scoring as follows:

  • Exceptional: 800 to 850
  • Very good: 740 to 799
  • Good: 670 to 739
  • Fair: 580 to 669
  • Poor: 300 to 579

As you’d expect, the higher your score, the better rates you’ll obtain. If you need to work on improving your overall credit score there are a few ways you can make strides. First, and foremost, make all of your monthly payments on time. Second, having several lines of credit can help add to your score. Credit reporting doesn’t happen overnight, so you’ll have to remain diligent if you want to reach exceptional credit. 

Have The Right Documents Ready

Being prepared will ensure your application process goes smoothly. Some documents to have handy include W-2s and 1099s, bank statements, and recent tax returns. 

Choose The Right Lender

Now that you’re ready with your documentation and project budget, you can start the search for the perfect lender. The most important thing to consider is the rates and terms as well as the ease of the application process. An online lender makes the process even easier because you can handle everything right from the comfort of your home. 

Is Getting A Home Improvement Loan Right For Me?

Home improvement loans are ideal for homeowners who want flexibility, fixed rates, and long terms. They’re also perfect for those who don’t have existing equity in their home. When you get a home improvement loan with AmeriFirst you’ll have access to competitive rates, flexible terms, and one of the easiest application processes available. If you still have questions, contact AmeriFirst to get on the right track.