How Do Home Equity Loans Work in Texas?

You may be wondering what a home equity loan is. A home equity loan is a type of second mortgage that allows a homeowner to borrow money by collateralizing the equity built up in their home. 

As a homeowner, you should be consistently making mortgage payments and over time accumulate equity in your property. Equity is the difference between the amount you owe on the mortgage and the current value of your property. Therefore, the less you owe on your mortgage, the more equity you have in your home. 

Texas home equity loans allow homeowners to access cash based on the amount of equity they have accrued in their home. With an equity loan, you get a lump sum of funds with a fixed interest rate on a term that lasts up to forty years. During the loan term, you’ll make payments that cover the principal and interest of the funds that you borrowed. 

Types of Home Equity Loans

Since Texas is a homestead state, it complicates the process of executing a traditional adjustable-rate home equity line of credit (HELOC). However, home equity loans and cash-out refinance loans are available in Texas and provide homeowners with an opportunity to tap into their home’s equity

Home equity loans, or HELOANs, function like a first mortgage. Using equity in their home as collateral, homeowners can open up a second mortgage with their lender to receive a lump sum of cash. Lenders will set a max loan amount based on the amount of equity a borrower has in their home and their financial profile. 

HELOAN rates in Texas are typically fixed, so a borrower’s interest rate can’t go up or down depending on current market conditions. Given the fixed interest rate, HELOANs in Texas have an element of stability and, since they’re secured by your home equity, home equity loans in Texas tend to offer lower rates when compared to things like credit cards and personal loans. 

Benefits of Texas Home Equity Loans

Home equity loans in Texas make it possible for homeowners to tap into their equity and get funds for anything they need. Some of the key benefits of Texas HELOANs include:

  • Flexible use of funds, access to capital, and improved cash flow.
  • Lower interest rates and relatively small monthly payments compared to other high-interest loans.
  • Griffin Funding offers competitive HELOAN rates in Texas. 
  • Access the equity in your home without having to touch your low-rate first mortgage.
  • Use a HELOAN to access equity in your primary residence, second home, or investment property. 

As you can see, home equity loans in Texas offer a wide range of benefits for homeowners who want to improve their cash flow. However, HELOANs in Texas aren’t the best option for everyone. Not sure whether a Texas home equity loan is right for you? Download the Griffin Gold app today to compare financing options, get personalized support from mortgage professionals, track home values, monitor your credit, manage your finances, and much more. 

Texas Home Equity Loan Qualification Requirements

To qualify for a home equity loan in Texas, there are a few general requirements you must meet. 

  • Sufficient home equity: Most lenders require between five and 15 percent retained equity in your home after securing your Texas home equity loan.
  • Credit score: A good credit score will demonstrate a history of timely payments and responsible credit management. Griffin Funding has confidence in your ability to repay the loan with a credit score as low as 640, but remember a higher credit score will lead to better ratings and terms.
  • Stable employment and income: W-2s, pay stubs, and tax returns verify your employment status and income levels to ensure the lender you can meet the monthly payment obligations. However, bank statement HELOANs are also available to self-employed Texas borrowers.
  • (DTI) Debt-to-income ratio: Is a metric ratio lenders use to evaluate your monthly debt payments against your gross monthly income to determine if you can afford a new loan. 
  • Property type and condition: Lenders want to ensure a solid investment and so the type of property and its condition can influence a lender’s decision and may have different equity requirements. 

Apply for a Home Equity Loan in Texas

Applying for a home equity loan in Texas allows you to tap into your home’s equity and leverage the value that you have built up in your home. At Griffin Funding, we’re committed to helping guide you through the Texas HELOAN application process. Contact us today and let us find the perfect loan for you and your home. Or, if you’re ready to tap into your home’s equity, fill out an online application