Your debt-to-income ratio: You can calculate your DTI by dividing all of your monthly debt payments by your monthly income. Lenders generally consider a DTI of 36 percent or less to be acceptable, but many lenders will consider borrowers with higher ratios, depending on their income. Anything getting close to 50 percent, though, may disqualify you.
There are several types of loans that can be used for house remodeling. Many homeowners take out a home equity loan or home equity line of credit (HELOC) for that purpose. The home is collateral for the loan. Because of this, rates are typically lower. One could even use credit cards for home improvements, but the cost likely would be prohibitive. Each loan has advantages and disadvantages.
Home improvement loans are unsecured, meaning they’re approved based on the borrower’s credit history and income and do not require collateral. They are offered by online lenders, banks, or credit unions and work similarly to personal loans. Once approved, you’ll receive funding through direct deposit or paper check, and then be able to pay for your building supplies and contractors.
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