The lending institution considers your creditworthiness when deciding if to extend a loan and how most of an interest rate you must pay. Your creditworthiness boils down to three things: your credit history, your earning and the loan to value percentage.

Credit bureaus gather info about the amount of debt you have and if you pay your bills punctually. They compile this info into a file called a credit report, , then boil all this down to a number between about 300 and 850. That number is your credit score. on occasion it is called a FICO score, after just Isaac Corp., the company that pioneered credit scoring.

This article describes how to get your credit report and understand it. you may be able to purchase your FICO score directly from just Isaac. Federal law entitles you to one free credit report per year. The report and the score can be bundled together or offered individually.

Your credit report contains:

• Personal info, like your name, address and Social Security number,
• Credit history, like when you opened your accounts, how much you owe, the amount of your credit limitations, if you closed accounts or the creditors closed them, and if you paid punctually,
• Public records, like if you have any bankruptcies, foreclosures, liens, repossessions, or legal judgments against you as well as failing to pay child support or taxes , and
• Lists of recent credit inquiries.

Income
Lenders want to know how much you make and how long you have been at your job, also as how long you have been working in your specific field. they'll look at your total debt to income ratio: How most of your monthly earning goes toward paying the mortgage, credit card bills, car payment and other responsibilities, as well as the payments on the equity debt for which you're applying. Most lenders want to keep that percentage under 36 %.

Be prepared to show your lender proofs of earning, like W-2s, tax returns and other income statements, or get prepared to be refused or pay a higher interest rate.
Loan to value percentage, or LTV
This is the percentage between what you owe on your house and what it is worth. If your house is worth $100,000 and you still owe $80,000, your loan to value percentage is 80 %, because $80,000 is 80 % of $100,000. When you bought the house, calculating the LTV was straightforward: the mortgage amount divided by the home's price.

It is more complex when you get a home equity product, because the home's value most likely changed since you bought it. The lender will get an assessment, or estimate, of the home's current just market value. Then it'll add the current mortgage balance to the size of the equity loan or credit line that you want, and divide that by the home's current value. That results in the new LTV percentage.

Traditionally, equity lenders want to keep your total loan to value at 80 % or less. as an example, if you owe $100,000 on a house that is now valued at $200,000, you could get an equity loan of up to $60,000. A loan that size could increase your total housing debt to $160,000, or 80 % of the home's value. But there are lenders that will go higher - , in some cases, for more than the value of the home. they are called high loan to value high LTV loans, and Bankrate's surveys of home equity lenders include lenders who offer them. Expect to pay a higher rate on such loans. you will only get that loan or credit line, although, if you earn enough to pay for the monthly deposits.