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What disqualifies you from getting a home equity loan?

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Loan application rejected
There are a few factors that could cause your home equity loan application to be denied — but there are also ways to fix the issues.

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With the Federal Reserve’s benchmark rate hovering at multi-decade highs, borrowers are facing the types of interest rates that make taking on new debt quite painful. In turn, it can be tough to find an affordable route to borrow money for buying a home, a car or even using your credit cards. But while many of today’s borrowing options are anything but cost-effective, there are still a handful of potential options that make sense. 

One of the borrowing options that has remained relatively affordable is a home equity loan. Thanks to surging home values over the past few years, homeowners have built up record levels of home equity that can be tapped into for nearly any purpose. And because home equity loans are secured by your home as collateral, the average interest rates on these loans are typically lower compared to other types of debt.

As a result, many homeowners have been using home equity loans to take advantage of borrowing at relatively low interest rates. But while home equity loans can certainly make sense, it’s important to understand that not every homeowner who applies will automatically be approved. There are factors that can disqualify you from getting a home equity loan — so if you’re planning to apply for one, it’s crucial to know what can cause your application to be rejected by lenders. 

Explore today’s top home equity borrowing options and compare rates here.

What disqualifies you from getting a home equity loan?

Here are some common disqualifying criteria for home equity loans as well as some potential solutions for overcoming these hurdles.

Low home equity levels

One of the primary requirements for getting a home equity loan is having sufficient home equity in your home. Most lenders require you to have at least 15% to 20% equity left in your home after factoring in the new loan amount. If your home’s value has not appreciated enough or you haven’t paid down a big enough chunk of your mortgage balance, you may not qualify for a loan due to inadequate equity levels.

The potential solution: In this case, you may want to postpone applying for a home equity loan until you’ve built up more equity either through your home gaining more value or paying down more principal on your mortgage.

Find the top home equity loan rates you could get today.

Poor credit score

Just as with any other loan, home equity lenders will analyze your credit score and credit history when you apply for a home equity loan. Those who apply with lower credit scores will have a harder time getting approved. And, that’s especially true for those with credit scores below 620 or so.

The potential solution: You may want to shop around and find out which lenders will work with those who have lower credit scores or take some time to improve your credit score before applying. As part of that process, be sure to pay all bills on time, pay down credit card balances and fix any errors on your credit report.

High debt levels

In addition to your credit score, lenders evaluate your debt-to-income (DTI) ratio when applying for a home equity loan. If you already have a lot of outstanding debt compared to your income level, taking on a new monthly home equity loan payment may be too much based on the lender’s criteria.

The potential solution: The best route is typically to pay down as much existing debt as possible before applying for a home equity loan in order to lower your DTI ratio to acceptable levels.

Unstable income and employment

Income and job stability also factor into the approval process when applying for a home equity loan. If you have an unsteady income stream or have switched jobs frequently, lenders may be wary of your ability to keep up with the new loan payments due to what’s perceived as instability related to your employment.

The potential solution: If you want to avoid disappointing news about your home equity loan, it’s important to stay at your current job for as long as possible and build up a solid history of steady paychecks before applying.

Issues with the property type

Certain property types like condos, co-ops, multi-family residences, log homes or homes on leased land can complicate the home equity loan approval process. These non-traditional property types often face extra scrutiny during the lending process, and in certain cases, it could cause your home equity loan application to be rejected.

The potential solution: Shop around before applying and check with several lenders to see which ones may be more amenable to lending on your specific property type. 

Insufficient home value

If the appraised value of your home is lower than expected, it may not provide enough collateral to make the lender comfortable extending a home equity loan against it.

The potential solution: Get multiple appraisals to identify the highest possible valuation. Making renovations and cosmetic upgrades to increase your home’s market value can also help.

Outstanding tax liens and judgments

Having an outstanding federal tax lien, court judgments or unresolved issues with creditors can be an impediment to securing approval on a home equity loan application. Lenders want to see a clean financial track record, and in certain cases, the liens on your property can make it difficult or impossible to borrow against it.

The potential solution: Resolve any outstanding liens, judgments or creditor disputes before applying for a home equity loan in order to present a clear financial picture for lenders.

The bottom line

While home equity loans represent one of the most affordable borrowing options in today’s high-interest rate landscape, not every homeowner will qualify to borrow with this option. But by understanding some of the key reasons for denial and proactively taking steps to overcome those hurdles, you can potentially improve your chances of approval. As with any major financial decision, though, doing your research upfront can pay dividends in the long run.



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American and U.K. climbers rescued after 2 days stranded on Himalayan mountains in India

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An American climber was rescued after she and another alpinist from the U.K. were stranded for two days at more than 20,000 feet in the Himalayan mountains.

Michelle Dvorak, 31, and Fay Manners, 37, went missing on Thursday after their equipment and food tumbled down a ravine while trekking up India’s Chaukhamba mountain, CBS News partner BBC reported.

The pair sent an emergency message but search and rescue teams were unable to find them.

Rescued British and U.S. climbers pose for a photo with rescuers in Joshimath, Uttarakhand
Rescued British and U.S. climbers pose for a photo with rescuers in Joshimath, Uttarakhand, India on October 6, 2024.

INDIAN AIR FORCE/Handout via REUTERS


Manners told the BBC they were “terrified” as they tried to make part of the descent down the treacherous mountains without supplies.

“I watched the bag tumble down the mountain and I immediately knew the consequence of what was to come,” she said. “We had none of our safety equipment left. No tent. No stove to melt snow for water. No warm clothes for the evening.”

The terrifying ordeal intensified when it started to snow. They took cover on a ledge while waiting for rescuers.

“I felt hypothermic, constantly shaking and with the lack of food my body was running out of energy to keep warm,” Manners said.

The rescue was made difficult because of the conditions, including bad weather, fog and high altitude.

“The helicopter flew passed again, couldn’t see us. We were destroyed,” Manners told the BBC.

British and U.S. climbers are rescued at the location given as Uttarakhand
British and U.S. climbers are rescued at the location given as Uttarakhand, India on October 6, 2024.

INDIAN AIR FORCE/Handout via REUTERS


On the second day, the pair began to cautiously abseil down the mountain. They spotted a team of French climbers coming toward them. Manners said they shared their equipment and food and contacted the helicopter company with an exact location.

“I cried with relief knowing we might survive,” she said.

The Indian Air Force said in a post on the X social media platform that their helicopter airlifted the climbers from 17,400 feet after “battling two days of bad weather.”

Chaukhamba is a mountain massif in the Garhwal Himalaya in northern India.



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Biden sends more troops to North Carolina for continued Hurricane Helene response

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President Biden approved the mobilization of another 500 active-duty troops to North Carolina to assist in the recovery efforts after the deadly and devastating Hurricane Helene.

“With a total of 1,500 troops now supplementing a robust on-the-ground effort – including more than 6,100 National Guardsmen and more than 7,000 Federal personnel – the Biden-Harris Administration is mobilizing all relevant resources to support families as they begin their road to rebuilding,” the White House said in a statement Sunday.

Mr. Biden previously announced that the federal government would cover “100%” of costs for debris removal and emergency protective measures in North Carolina for six months. The Biden administration has also released more than $137 million in federal funds – including $100 million in transportation funds for North Carolina to begin rebuilding damaged roads and bridges.

Hurricane Helene
Businesses are seen in a debris field in the aftermath of Hurricane Helene, Wednesday, Oct. 2, 2024, in Chimney Rock Village, N.C.

Mike Stewart / AP


More than 800 people unable to return home are staying in lodging provided through FEMA, and 22 shelters are still housing nearly 1,000 people as mobile feeding operations continue to help survivors.

“My Administration is sparing no resource to support families as they begin their road to rebuilding,” Biden said. “We will continue working hand-in-hand with local and state leaders – regardless of political party and no matter how long it takes.”

Earlier Sunday, North Carolina Sen. Thom Tills called for more resources to bolster the relief effort and likened the damage to Hurricane Katrina’s mark on Louisiana in 2005.

“The scope of this storm is more like Katrina,” he told CBS News’ Margaret Brennan on “Face the Nation with Margaret Brennan”. “It may look like a flood to the outside observer, but again, this is a landmass roughly the size of the state of Massachusetts, with damage distributed throughout. We have to get maximum resources on the ground immediately to finish rescue operations.”


Telecom providers operate emergency communications after Hurricane Helene

04:04

Mr. Biden, Vice President Kamala Harris and former President Donald Trump have all traveled to some of the impacted regions.

Hurricane Helene caused catastrophic damage from Florida into the Appalachian mountains and killed more than 225 people across multiple states. That number includes 114 killed in North Carolina alone.

The White House said Mr. Biden has also been briefed on Hurricane Milton, which is forecast to make landfall in Florida’s Tampa Bay area as a major storm on Wednesday.

U.S. disaster relief chief blasts false claims about Helene response

Deanne Criswell, who leads the Federal Emergency Management Agency, said on Sunday that the recent false claims and conspiracy theories about the federal response to the storm are “demoralizing” aid workers.

“It’s frankly ridiculous, and just plain false. This kind of rhetoric is not helpful to people,” she said. “It’s really a shame that we’re putting politics ahead of helping people, and that’s what we’re here to do. We have had the complete support of the state,” she said, referring to North Carolina.

Georgia Continues Recovery Efforts In Aftermath Of Hurricane Helene
A ‘We Need Power’ sign is seen as people deal with the aftermath of Hurricane Helene on October 05, 2024, in Greenwood, South Carolina.

Joe Raedle/ Getty Images


Republicans, led by Trump, have helped foster a frenzy of misinformation over the past week among the communities most devastated by Helene, promoting a number of false claims, including that Washington is intentionally withholding aid to people in Republican areas.

Trump accused FEMA of spending all its money to help immigrants who are in the United States illegally, while other critics assert that the government spends too much on Israel, Ukraine and other foreign countries.

Tillis, a Republican, on Sunday rejected that claim, telling “Face the Nation with Margaret Brennan” that resources being used on immigration is “not yet … affecting the flow of resources to western North Carolina.”

Tillis said the stream of misinformation about relief efforts in North Carolina is a “distraction.”

“I believe that we have to stay focused on rescue operations, recovery operations, clearing operations, and we don’t need any of these distractions on the ground,” Tillis said. “It’s at the expense of hard-working first responders and people that are just trying to recover their lives.”

Mr. Biden said in a statement Sunday that his administration “will continue working hand-in-hand with local and state leaders –- regardless of political party and no matter how long it takes.”



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Rep. Mike Turner says all “candidates need to deescalate” after Trump assassination attempts

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Rep. Mike Turner says all “candidates need to deescalate” after Trump assassination attempts – CBS News


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House Intelligence Committee chairman Rep. Mike Turner tells “Face the Nation with Margaret Brennan” that in the wake of the assassination attempts on former President Donald Trump “all the candidates need to deescalate, especially in their language.” But when asked if there’s anything to imply Eric Trump’s allegation that Democrats are “trying to kill” Trump is true, Turner said “of course not.”

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