home loan bad credit
Do you need good credit to take out a home equity loan? Will bad credit affect chances of being considered?
My credit is poor but I have probably $80k in equity in my home. Will a bank refuse to approve a home equity loan because of bad credit?
If you have bad credit, you are less likely to be approved for a loan, or if you are approved, you may have to pay a higher interest rate.
Part of the decision will be based on what % the $80k in equity is of the value of your home. If your home is worth $800k and you have $80k (10%) in equity and bad credit, you are unlikely to be approved for a home equity loan. On the other hand, if your home is worth $160k and you have $80k (50%) in equity and bad credit, there is a good chance that you will be approved for a loan.
This is because the bank looks at how much they could realize from your house if they had to foreclose, and if you only have 10% equity, almost all of that could be eaten up by foreclosure costs, so the bank would lose money if they loaned you the $80k and then had to foreclose.
