Home Equity Loan Requirements
Lenders check four things before handing you money against your home: your equity stake, your credit, your income, and the property itself. Here are the actual thresholds.
Most lenders want at least 15 to 20 percent equity remaining after the loan, a credit score of 620 or higher (680-plus for good rates), verifiable income, and a debt-to-income ratio under 43 to 50 percent. An appraisal or valuation confirms the property value.
Equity and credit thresholds
Most lenders want you to keep 15 to 20 percent equity after borrowing, which is the 80 to 85 percent CLTV cap in practice. Minimum credit scores start around 620, but pricing improves sharply at 680 and again at 740. Below 620, options are thin and expensive.
Your first mortgage history matters: lenders scrutinize recent late payments closely. A clean 12-month payment record on the mortgage is nearly as important as the score itself. If your score is borderline, paying down credit card balances before applying can lift it within a billing cycle or two.
Income, DTI, and documentation
Lenders verify income with pay stubs, W-2s or tax returns, and sometimes bank statements. Self-employed borrowers face deeper documentation: two years of tax returns is standard. The debt-to-income ratio, all monthly debts including the new payment divided by gross monthly income, usually must stay under 43 to 50 percent depending on the lender.
Have documents ready before you apply: two months of bank statements, recent pay stubs, two years of tax returns, homeowner insurance declarations, and your current mortgage statement. Prepared files can shave weeks off the timeline.
The property check
The lender verifies value with an appraisal or automated valuation. They also confirm the property type: single-family primary residences get the best terms, while condos, multi-unit properties, and investment properties face stricter CLTV caps and higher rates.
The appraisal can make or break the application. If it comes in low, you can accept a smaller line, dispute it with comparable sales, or pay for a second appraisal in some cases. Keep the home show-ready and list recent upgrades for the appraiser; documented improvements support value.
Skip the arithmetic
Check your equity position with the free home equity calculator before you apply.
Qualification questions
What credit score do I need for a home equity loan?
Below 620, most mainstream lenders decline; specialty lenders may approve at much higher rates. The jump from 679 to 680 can move pricing tiers, so small score improvements before applying pay off. Check your score from a real source, not a lender advertisement.
How long does it take to get a home equity loan?
HELOCs from digital lenders can fund in under two weeks when valuations are automated. Full-appraisal lump-sum loans run longer. Delays usually come from document requests and appraisal scheduling, which is why having paperwork ready matters.