HELOC Eligibility Requirements
Getting approved for a Home Equity Line of Credit (HELOC) involves more than just owning a home. Lenders carefully assess your financial health to determine if you qualify and how much you can borrow. Here's a breakdown of the key requirements.
1. Sufficient Home Equity (LTV)
This is the most crucial factor. Lenders typically require you to maintain at least 15% to 20% equity in your home after the HELOC. This means your combined loan-to-value (LTV) ratio—your current mortgage balance plus your desired HELOC, divided by your home's value—should not exceed 80% to 85%.
Example LTV Calculation
Let's say your home is valued at $500,000. Most lenders follow the 85% rule for the maximum combined loan-to-value (CLTV).
- Max potential debt: $500,000 * 85% = $425,000
- Your current mortgage balance: $250,000
- Your potential HELOC: $425,000 - $250,000 = $175,000
Use our HELOC Calculator to automatically calculate this based on your numbers.
2. Good to Excellent Credit Score
Your credit score is a primary indicator of your reliability as a borrower. While requirements vary by lender, you'll generally need acredit score of 680 or higher to qualify for a HELOC. A score above 720 will likely get you the most favorable interest rates and terms. Lenders will look at your credit report for:
- A consistent history of on-time payments.
- No recent bankruptcies or foreclosures.
- A healthy mix of credit types.
3. Low Debt-to-Income (DTI) Ratio
Your DTI ratio compares your total monthly debt payments to your gross monthly income. It shows lenders how much of your income is already committed to debt. Most lenders prefer a DTI ratio of 43% or less, although some may go up to 50% for very strong applicants.
How to calculate DTI: (Total Monthly Debt Payments / Gross Monthly Income) x 100. Be sure to include your mortgage, car loans, student loans, credit card minimum payments, and the estimated payment for the new HELOC.
4. Verifiable Income and Stable Employment
You must prove you have a reliable source of income to make your payments. Lenders will want to see:
- Recent pay stubs.
- W-2 forms from the last two years.
- Federal tax returns.
- A stable employment history, typically at least two years with the same employer or in the same line of work.
If you're self-employed, you'll need to provide more extensive documentation, such as profit and loss statements.
Eligibility Checklist
| Requirement | Typical Guideline | Do I meet this? |
|---|---|---|
| Loan-to-Value (LTV) | 85% or lower | (Check with Calculator) |
| Credit Score | 680+ | Yes / No |
| Debt-to-Income (DTI) | 43% or lower | Yes / No |
| Stable Income | 2+ years documented | Yes / No |
What if I Don't Qualify?
If you don't meet all the requirements, don't be discouraged. You can take steps to improve your financial profile, such as paying down debt to lower your DTI, working to improve your credit score, or simply waiting for your home's value to appreciate further.
Eligibility FAQs
While it varies by lender, a score of 680 is often cited as a good starting point. However, some lenders might accept scores as low as 620, likely with a higher interest rate or lower LTV limit. A score of 720 or higher will give you the best chance at approval with the most favorable terms.
Yes, but you'll need to provide more extensive documentation to prove stable and sufficient income. Be prepared to submit at least two years of tax returns, profit and loss statements, and bank statements. Lenders want to see a consistent earnings history.
Pre-qualifying for a HELOC usually results in a "soft inquiry," which does not affect your credit score. However, when you formally apply for the loan, the lender will perform a "hard inquiry," which can temporarily lower your score by a few points. It's wise to do all your rate shopping within a short period (e.g., 14-45 days) as multiple hard inquiries for the same type of loan are often treated as a single event by credit scoring models.
Last Updated: June 10, 2025
Author: The HELOCcalc.com Editorial Team
Disclaimer: The information provided is for educational purposes only and does not constitute financial advice. Eligibility requirements vary by lender and are subject to change.