How to get a home improvement loan?

A home improvement loan lets you borrow money to repair, remodel, or upgrade your home. Depending on your finances and home equity, you can choose from several loan types:

• Home equity loan,

• Home equity line of credit (HELOC)

• Cash-out refinance

• FHA 203(k) loan

• Unsecured personal loan

Each option has different requirements, rates, and repayment terms. The best fit depends on your home's value, your available equity, and how much flexibility you need.

Start by mapping out your project and estimating total costs. A few things to nail down before you borrow:

• Get multiple quotes: Contractor bids vary widely — getting at least three gives you a realistic cost range.

• Account for all line items: Include materials, labor, permits, and a 10–15% cushion for unexpected expenses.

• Know your project type: Cosmetic upgrades (paint, fixtures, flooring) typically cost less and fund faster than structural work (additions, foundation, roofing).

Knowing the full scope of your project helps you avoid over- or under-borrowing later.

Most secured home improvement loans require you to have built enough equity in your home, typically 15–20%.

Other key factors lenders generally review include:

• Credit score: 670 or higher generally qualifies you for the best rates, though some lenders accept lower scores with adjusted terms.

• Debt-to-income (DTI) ratio: Most lenders prefer a DTI under 43%.

• Stable income: Proof of steady employment or self-employment income.

Example: If your home is worth $500,000 and you owe $350,000, you have $150,000 in equity. With an 80% loan-to-value (LTV) cap, you could borrow roughly $50,000–$60,000 for home improvements.

There's more than one kind of home improvement loan. Here's a look at the main options and when each tends to fit best.

Pro Tip: For smaller projects, a personal loan may be the fastest choice. For large remodels or additions, tapping home equity usually offers lower rates.

Having paperwork ready can speed up approval. Most lenders ask for:

• Recent pay stubs or tax returns

• W-2s or profit-and-loss statements

• A current mortgage statement

• Project cost estimates or contractor bids

• Home appraisal (for secured loans)

Being organized can shave days off your approval time and show lenders you're a prepared borrower.

Most lenders let you start online. The process typically includes:

• Prequalification: A soft credit check gives you estimated rates and terms without affecting your score.

• Full application: Submit documentation for verification.

• Appraisal: For secured loans, a professional determines your home's current or after-renovation value.

• Underwriting: The lender reviews your financial profile and finalizes terms.

• Closing and funding: Sign your documents and receive funds, either as a lump sum or in stages.

Funding times vary by loan type. Personal loans can arrive in days, while secured loans may take several weeks.

Repayment terms can range from 5 to 30 years, depending on the loan type. Fixed rates mean predictable monthly payments, while variable rates (common with HELOCs) can fluctuate over time.

To stay on track:

• Borrow only what you need: Taking more than necessary increases your monthly payment and reduces future equity.

• Set up automatic payments: Helps you avoid missed due dates and potential late fees.

• Track your renovation impact on home value: It helps you gauge your project's return on investment over time.

• Interest rate environment: Fixed rates offer stability. Variable rates may rise or fall depending on market conditions.

• Loan size vs. home value: Avoid borrowing more than 80–90% of your home's current value.

• How long you plan to stay: Large loans make more sense if you remain in the home long enough to recoup the cost.

• Funding speed vs. cost: Faster loans often carry higher rates weighing urgency against total cost of borrowing.

Knowing how to get a home improvement loan puts you in a stronger position before you ever speak to a lender.

Estimate your costs, review your finances, compare your options, and choose the loan that fits your budget and timeline.

Ready to take the next step? Explore home lending options from Axos to find a solution that works for your project.

Frequently asked questions

What credit score do I need for a home improvement loan?

Most lenders look for a score of 670 or higher for the best rates. Some lenders accept lower scores, but you may face higher interest rates or stricter terms. Check your score before applying, so you know where you stand.

What's the difference between a home equity loan and a HELOC?

A home equity loan gives you a lump sum at a fixed rate, which works well for one-time projects with a defined cost. A HELOC works more like a credit card; you draw funds as needed up to a set limit, which suits phased or ongoing renovations.

Can I get a home improvement loan without home equity?

Yes. An unsecured personal loan doesn't require equity or collateral. The trade-off is typically a higher interest rate and shorter repayment term compared to equity-based options.

Are home improvement loan interest payments tax deductible?

Interest in home equity loans and HELOCs may be tax deductible if the funds are used to buy, build, or substantially improve your home. Consult a tax advisor to confirm eligibility based on your specific situation.