Inside the Home Owner Debt Consolidation Loan Process

If you have equity in your home and bills to consolidate, you may qualify as a consolidation debt home loan owner. How does the process work?  In short, the steps follow much the same route as a home mortgage loan.

  • Cash-out Refinance or Home Equity Loan - Your choices are a cash-out refinance, where you refinance your home and use the extra cash to pay off debt, or a home equity loan (HELOC), which uses your home as security and you have a certain amount of equity or line of credit with which to consolidate debt as a home owner.
  • Agree on Terms - Decide the length of the term, the interest rate, amount you want to put down and any closing costs.  Obtain your good-faith estimate and examine it carefully.
  • Documentation and Paperwork - As with a first mortgage, a refinance or HELOC requires lots of paperwork and documentation.  Be prepared to document your employment and income and understand that the process requires thorough credit checks, analysis of your outstanding debts, how much you'll put down, closing costs, what kind of cash reserves you have, and much more.  The paperwork alone can be daunting, but it's all part of the consolidation debt home loan process.
  • Understand the Underwriting - Again, this is similar to a first mortgage.  Lenders will likely require a home inspection, insurance, and other items.
  • Closing and Escrow - Final paperwork for your consolidation debt home loan is signed at closing.  This is also where you'll pay closing costs and fees and money that go into your escrow account (also called an impound account) to take care of real estate taxes and insurance.  You may be able to pay your taxes and insurance separately rather than have them paid out of your impound account.