HELOC is an initialism that stands for Home Equity Line of Credit. It is one type of home equity loan.

A home equity loan allows borrowers to take out a loan using their home’s equity as credit. The home’s current market value and the total amount left to pay on your mortgage are used to calculate how much you can borrow. This loan has a fixed timeline to be repaid.

HELOCs have a draw period (usually 5-10 years) where the homeowner can access funds as needed, followed by a repayment period. HELOCs have variable rates tied to an index.

In contrast, fixed-rate home equity loans provide a lump sum upfront to be repaid in fixed monthly payments over a set term. Rates are fixed for the loan’s life so payments stay consistent.

The main HELOC advantage is flexible access to funds as needed during the draw period. However, variable rates mean payments can fluctuate. Home equity loans offer payment predictability but less flexibility.

Understanding differences between HELOCs and other home equity loans helps borrowers select the best option to tap equity. Consulting a loan officer is advisable to choose the most suitable loan product.

To qualify for a HELOC, borrowers must meet criteria like having enough home equity, an acceptable debt-to-income ratio, sufficient taxable income, a qualifying loan-to-value ratio, strong tax returns and credit score, and a down payment if needed. The more home equity you have, the more likely you'll get approved.

HELOC loans can be good options for self-employed homeowners who may struggle to qualify for other financing. Since HELOCs use home equity as collateral, they are easier to obtain than personal/unsecured loans. However, you still need to provide proof of your monthly income and meet eligibility requirements. Though not as stringent as conventional loan standards, minimum HELOC requirements must be met with documented income statements. Overall, HELOCs provide more attainable financing for self-employed borrowers.

It's often possible to qualify for a HELOC without providing income documentation. Approval is determined case-by-case based on home equity, credit score, bank statements, etc. Lack of income proof may impact loan rates.

There's no set DTI ratio for HELOC approval. Lenders prefer under 40% but make case-by-case determinations. Self-employed borrowers can qualify with proper documentation. Contact lenders to learn more about qualifying with your specific financial situation.

Common reasons for taking out a home equity loan include:
• Debt consolidation
• Paying for education
• Home remodeling/improvements
• Covering moving costs

HELOCs are often preferred by self-employed borrowers because qualification relies more on home equity rather than verifiable employment income, providing attainable financing.

In general, closing costs are included in calculating your home’s equity. They can include:
• Application fees
• Property appraisal costs
• Title fees
• Lawyer fees
• Property insurance
• Filing fees

Closing costs can be a not-insubstantial portion of your home equity loan, often several thousand dollars.

Excel Federal Credit Union offers no closing costs on home equity loans if you keep the account open and current for a set time, saving thousands. Loan officers can discuss how to qualify for these cost-saving no closing cost loans.