Specify Your Needs
Most often, homeowners want a home improvement loan to complete a particular project. When applying for the loan, be sure to be specific about your needs. Letting the lender know exactly how you will spend the money can increase your chances of being approved for the loan.
For example, suppose you apply for a loan to replace all your windows, which will make your home more energy efficient and will increase its value. If you explain to lenders how you're using the money, they're more likely to see your request as a legitimate, credible use of the funds and are more likely to approve the request.
On the other hand, lenders are less likely to approve vague requests. If you bought a fixer-upper and need to make many repairs, it's better to itemize what needs to be done rather than saying you need to fix your house or replace everything. Overly broad or vague requests such as these could be for anything, and lenders like to know how you'll use the money.
Ask for a Specific Amount of Money
When renovating your home, you may be tempted to ask for extra money, either for unforeseen costs or for other needs. Home improvement lenders will be more likely to approve you for a loan if you ask for a reasonable amount of money. To avoid asking for too much money, do your research and get an estimate of how much you'll need for your project. Lenders will be more favorable towards applicants who ask for a specific amount to cover their project needs.
Check Your Credit Score
Home improvement loans, like any other loans, depend largely on your credit score. The better your credit score is, the more likely a lender is to approve your application. To prepare for your loan application, check your credit score ahead of time to ensure it's in good shape. Be sure to also check your credit report for any mistakes that may impact your loan application.
If your credit isn't where you want it to be or is less than ideal, you may still be able to find a lender to approve your loan, though it will be more difficult. If you have a low credit score, adding a co-signer may be an option that can help you get the money you need for your project:
- Co-signers: Co-signers may help you get approved for a home improvement loan if you have low credit. Co-signers become responsible for making payments on your loan if you fail to or are unable to. They essentially serve as a backup, which increases the likeliness of getting your application approved. If you can get an individual with great credit to co-sign for you, it can improve your chances of approval and may even lower the interest rates on repayment.
Determine Your Home's Equity
When you're applying for a home addition or improvement loan, many lenders will consider your home's equity, which is how much your home would be worth if you sold it today minus any remaining amount you still owe. Research the value of your home so you can share this information with your lender.
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