If you’re hoping to tap the equity in your home with a home equity loan or line of credit (HELOC), getting prequalified can allow you to get rate quotes from multiple lenders without an impact on your credit score.
However, prequalification options can vary depending on which lender you choose, so it’s important to know what to expect during the process.
In this guide:
- Can I prequalify for a home equity loan or HELOC?
- What is the difference between prequalification and preapproval?
- How to prequalify for a HELOC or home equity loan
Can I prequalify for a home equity loan or HELOC?
Prequalifying for a home equity loan or HELOC is often the first step in getting approved. Getting prequalified to borrow from your home equity lets you estimate how much you can borrow and what terms you qualify for, including the interest rate, monthly payments, fees, and more.
Lenders benefit from prequalification because borrowers may be more likely to apply if they know what to expect. It also allows lenders to collect information about prospective borrowers so that they can follow up.
But not all lenders will enable you to prequalify for a home equity loan or HELOC, so it’s essential to check before you start the application process. We’ve researched nine top home equity lenders’ policies:
|Lender||Home equity loan?||HELOC?||Prequalification?|
|Bank of America||No||Yes||No|
Unlike an official application for a HELOC or home equity loan, getting prequalified involves a soft credit check, which won’t affect your credit score.
Some lenders, however, may use the term “prequalify” but still run a hard inquiry on your credit reports, which can affect your score. It’s wise to confirm which type of credit check the lender will run.
What is the difference between prequalification and preapproval?
With a mortgage loan, prequalification and preapproval are two separate processes. Prequalification gives you an estimate of what you can afford, while preapproval is nearly official approval.
However, the two terms are interchangeable with a home equity loan or HELOC.
How to prequalify for a HELOC or home equity loan
As you shop around for loan and line of credit options, check for details about prequalification on each lender’s website. Lenders may say you can check your rate or get a personalized rate, but make sure it specifies there’s no impact on your credit score to get a quote. If you aren’t sure, call and speak with a loan officer.
If a lender offers prequalification, you can often go through the process online. You can get prequalified with each lender or seek out comparison websites that simultaneously compare rates and other terms from multiple lenders. Either way, try to compare rates from at least three lenders.
Prequalifying for a home equity loan or HELOC can vary by lender. But in general, you’ll provide basic information about yourself, including:
- Full name
- Date of birth
- Income information
- Contact details
You may also need to provide a Social Security number and other basic information.
Can the terms of my HELOC or home equity loan change after I prequalify?
Yes. Prequalification can give you an idea of the terms you may qualify for, but it’s only based on a few details about you. So your quote may not be the same as the lender’s final offer.
To get a final offer, you must undergo a hard credit check and submit various documentation to prove your employment, income, homeownership, and other details.
The lender may also require an appraisal, which could affect your eligibility if it comes in lower than expected.
What should I do after prequalifying for a HELOC or home equity loan?
Once you go through the prequalification process with several lenders, narrow down your list of options to the lender that offers the best terms. In addition to the interest rate, compare fees, repayment terms, and other essential features.
After you pick your lender, you can apply through its website. The lender will provide a list of documents you’ll need. During this process, try to avoid applying for other forms of credit because it can lower your credit score.
If you prequalify for a HELOC and a home equity loan, consider which option would better suit your needs. If you want a large chunk of money for a one-time project, a loan may be better. But if you want ongoing access to a revolving line of credit, a HELOC might be the right choice.