Need a source of funding you can draw on at will? For Salem homeowners, a HELOC (home equity line of credit) may be the answer.

In this post, we’ll discuss all the key details you should know about getting a HELOC in your area. Things like:

• What a HELOC is
• How HELOCs differ from other kinds of loans and credit
• The process for getting a HELOC in Salem
• Why getting a HELOC from a credit union like VCU is a great option

Understanding HELOCs

Having a solid grasp of HELOC basics is an important prerequisite to actually going out and getting a home equity line of credit. As a savvy consumer, you’ll want to know what you’re in for!

What Is a HELOC?

A HELOC is a kind of secured loan that uses your house as collateral. HELOCs let you access a certain amount of funds on-demand that you can use for a variety of purposes, like home repairs, paying off credit cards or tuition bills, or debt consolidation. 

Your HELOC limit is based on a bunch of factors including:

• Market value of your home
• Amount of equity you have in your home
• How much money you still owe on your mortgage
• Your credit score and history

There are two phases to the life of a HELOC. The draw period, which is usually 5-10 years, is the window of time during which you can borrow against the line of credit. The repayment period, during which you can no longer draw on your HELOC, typically lasts for 10-20 years and is when you’re paying back the remaining balance of the loan.

HELOC vs Home Equity Loan

HELOCs are often likened to credit cards. This is because you can use as little or as much of your available credit as you want and only pay interest on the borrowed money. (So, if your HELOC is for $100,000 and you use $10,000 — you’re only making payments and paying interest on $10,000.) Additionally, you can often keep a HELOC open indefinitely.

Home equity loans, on the other hand, are more akin to regular loans. You get a lump sum when you take out the loan and have a predetermined period of time to repay what you borrowed. You pay interest on the entire unpaid portion of the home equity loan.

For more on this topic, check out Home Equity Line of Credit (HELOC) vs. Home Equity Loan.

Advantages of a HELOC

HELOCs are popular because they’re flexible and can be a more affordable way to handle financial demands. While you have funds available to use when needed, you’re only paying interest on the amount you’re currently borrowing. Often, the interest rate (and maybe other terms and conditions as well) for a HELOC are more favorable than those of credit cards or personal loans.

You can go more in-depth on the pluses and minuses of HELOCs by reading Home Equity Lines of Credit: Pros and Cons and How to Get One.

Eligibility & Requirements for a HELOC

Each lender will have its own set of qualifications for HELOCs. However, according to Zillow, the following are common approval standards: 

• A credit score of at least 620
• At least 15% home equity
• No more than 40% debt-to-Income (DTI) ratio
• Verification of sufficient income/assets

How to Get a HELOC in Salem, OR

Getting a HELOC is fairly straightforward. There are essentially three stages to the process. Let’s break it down.

Preparing to Apply for Your HELOC

1. Check your credit record. Your credit score influences your eligibility, HELOC amount, and interest rates. It’s helpful to know where you stand before you apply for a HELOC.
2. Determine your home equity. This will clue you in to how much of a HELOC you might get, if the HELOC is enough for the expenses you want to cover, etc.
3. Explore your options. Contact different lenders and compare HELOC terms and conditions. Use a loan calculator to see how much debt you can afford to take on. Each person’s situation and needs are unique so it may take some research to zero in on a good match. 
4. Pick a lender. Your best bet is to find a HELOC lender that offers you the optimal package of favorable terms and conditions and responsive and knowledgeable customer service.
5. Gather your documents. Prospective lenders will ask for things like proof of income, official identification, etc. The application process will go faster and smoother if you have these ready to go.

Applying for Your HELOC

• Contact your chosen lender. The lender will provide additional information as to their specific HELOC products and processes. This is a great opportunity to ask questions or seek guidance on applying.
• Complete your application. Fill out the application form and submit it with any supporting documents. You may be able to do all of this online. The lender may reach out for additional information.
• Wait for the decision. In some cases, you’ll hear back almost immediately. Other times, the lender will take longer to evaluate your application. If you don’t hear back in a reasonable amount of time, follow up.

Getting Your HELOC

• Get a home appraisal. Your lender may request a real estate assessment in order to underwrite your HELOC. 
• Review your HELOC agreement. Carefully read through the contract and all disclosures. Make sure you understand the terms and conditions you’re committing to.
• Sign and close on your line of credit. If all looks okay to you, write your name on the dotted line — you’ve got yourself a HELOC! You should have access to your line of credit soon.

With your HELOC in hand, you’re ready to spend the funds that are now at your disposal.

Top HELOC Lenders in Salem, OR

You have lots of lenders to pick from. There are several big-name national lenders as well as many hometown HELOC providers — like credit unions.

With this in mind, you may be wondering:

• Why opting for a Salem-area lender is an attractive alternative
• Why credit union HELOCs are worth considering
• What kind of HELOC rates are available in Salem, OR

Why Shop Local for HELOCs

While there are plenty of arguments for getting your HELOC from a neighborhood financial institution, here are two compelling reasons we’d like to highlight.

• Better service and support. When you work with a local provider, chances are they’re more invested in you and your welfare. The people helping you may even be your neighbors, have kids at the same school as yours, etc. There’s likely to be some sort of deeper connection, which can translate into a more positive experience for you. (This is something credit unions are known for.)
• Keeping money in your community. By using a HELOC lender in your own town, you’re actively supporting a local business and boosting the local economy. More of the money you’re repaying remains in Salem — flowing to nearby businesses, organizations, and initiatives — instead of going out of state to benefit other distant communities. 

Credit Unions Are HELOC Happy Places

In general, consumers consistently express deep satisfaction with their credit unions. Members find their credit union more trustworthy, service-oriented, and competitive than mainstream financial institutions.

This holds true for HELOCs as well. For example, at Valley Credit Union, Salem residents get stellar credit union service plus advantages like:

• Line of credit up to 90% of loan to value (LTV)
• 10-year draw period with a 10-year repayment period
• Better loan rates, including discounts with auto pay from a VCU checking account
• Low fees and no hidden fees
• The flexibility of variable or fixed interest rates
• Minimum payment of 1% of the outstanding balance monthly
• No prepayment penalties
• Encryption and personal account monitoring for extra security and reliability
• Skip-a-Payment program

HELOC Rates — Salem, OR

Speaking of terms and conditions, here’s a quick snapshot of HELOC rates in Salem, OR, as of late April 2024. Remember, several variables go into determining the rates so this is just to give you a ballpark idea of HELOC rates in Oregon.

• Lowest APR: 5.5%
• Average APR: 9%
• Highest APR: 18%
• Competitive APR: 7% (for > 680 credit score and < 80% LTV ratio)

This table illustrates competitive rates at various credit score and LTV tiers that you might find in Salem. You can see that the higher your credit score, the lower the interest rate you’ll pay.

	Variable-Rate HELOC		Fixed-Rate HELOC
Credit Score	LTV Ratio < 80%	LTV Ratio 80%-90%	LTV Ratio < 80%	LTV Ratio 80%-90%
730+	9.25%	10.25%	9.00%	10.00%
680-729	10.25%	11.50%	10.00%	11.25%
640-679	11.25%	-	11.00%	-
600-639	13.25%	-	13.00%	-
550-599	17.25%	-	17.00%	-
000-549	18.00%	-	18.00%	-

_{Data source: Valley Credit Union. Disclaimer: Additional fees and factors may impact the rates available to you.}

With the average credit score of just over 730 in the state, the odds of HELOC approval for Oregonians is high.

Superior Service & Competitive HELOC Rates in Salem, OR

There’s a reason people repeatedly come to Valley Credit Union for their HELOC loans. We offer some of the most favorable terms and best customer support around.

When you’re ready to tap into your home’s value, contact VCU. We’re here to answer your questions and help you get your home equity line of credit.

About the Author

 Justin Roberts, Vice President of Lending

Justin Roberts is our Vice President of Lending and has been in the financial industry for over 18 years. He is an Oregon State University Graduate and has just completed Western CUNA Management School. When he is not focused on helping the members at Valley, you will find him coaching his two sons and volunteering his time to help develop the youth in our communities through sports.