HELOC Requirements Checklist: Income, Credit & Equity

The 4 Pillars of Approval

Getting a HELOC is harder than getting a mortgage. Because it is a "Second Lien," banks take on more risk, so they scrutinize you harder. Here is what you need to pass the test.

1. Equity (Max 85% CLTV)

You must have at least 15-20% equity left over after the loan.
Formula: (Primary Mortgage + New HELOC) / Home Value < 0.85.

2. Credit Score (680+)

While some lenders go down to 620, most major banks want 680 or higher.
760+ Credit: Gets the best interest rates (Prime + 0%).
680-759 Credit: Gets standard rates (Prime + 1%).

3. Debt-to-Income (DTI < 43%)

Your total monthly debt payments cannot exceed 43% of your gross monthly income. This includes the new HELOC payment.

4. Income History

You need 2 years of consistent employment history. If you are self-employed, see our Self-Employed Guide.

Documents to Have Ready

• Government-issued photo ID for every borrower.
• Recent pay stubs and W-2s, or two years of personal and business tax returns if you are self-employed.
• The latest statement for every mortgage or lien on the property.
• Your homeowners insurance declarations page and property tax bill (plus HOA statements if applicable).
• Statements for other debts such as car loans, student loans and credit cards, so the lender can confirm your DTI.

The Appraisal Step

The lender needs a current value to calculate your combined loan-to-value. Depending on the lender and line size, that may be a full in-person appraisal, an exterior-only drive-by, or an automated valuation. If the value comes in lower than you expected, the approved line shrinks with it. Our HELOC appraisal guide explains what each type looks at.

How to Improve Your Odds Before Applying

• Pay down credit card balances: it lowers utilization (helping your score) and your DTI at the same time. Our DTI guide shows the math.
• Avoid opening new credit accounts in the months before you apply.
• Pull your credit reports and dispute errors early, since corrections can take weeks.
• If you are close to the CLTV limit, request a smaller line; a lower ask can be the difference between approval and denial.
• Compare several lenders, including a local credit union, because approval criteria differ between institutions. If your score is on the low side, read getting a HELOC with bad credit.