Best Home Equity Loans and HELOCs if You’re Self-Employed

When you’re self-employed and applying for a home equity loan or line of credit (HELOC), you may need to take a few extra steps when it comes to verifying your income because lenders can’t rely on an employer-issued paystub or W-2 to confirm how much you earn.

However, getting approved for home equity financing is possible when self-employed. And it’s much easier when you prepare ahead of time. Even if you don’t receive any formal pay stub or income tax form, you can work with lenders that offer alternative income verification methods to help you qualify. 

Can you get a home equity loan or HELOC if you’re self-employed?

Yes, self-employed individuals can qualify for a home equity loan or a home equity line of credit (HELOC), but the process may involve additional steps to verify income and financial stability.

• A home equity loan allows homeowners to borrow a lump sum against the equity in their home, often at a fixed interest rate with fixed monthly payments over a set period. 
• A HELOC provides access to a revolving line of credit that you can draw from as needed, similar to a credit card, often with a variable interest rate.

Eligibility criteria for self-employed borrowers

For home equity loans and HELOCs, lenders generally require:

1. Sufficient home equity: Most lenders require you to have at least 15% equity in your home.
2. Proof of income: Self-employed borrowers need to provide additional documentation, such as two years of tax returns, profit and loss statements, and bank statements, to verify their income. 
3. Good credit score: Home equity loan and line of credit lenders often cite a minimum required FICO credit score of 640 to 670. However, we’ve observed that they almost exclusively approve applicants with scores of 720 or higher, and they may require a higher score for self-employed applicants.

If you’re a self-employed homeowner, be prepared to demonstrate consistent income over a few years and maintain strong financial records to improve your chances of qualifying. Some lenders may be more flexible with self-employed borrowers, so it can help to shop around and compare options.

Reviews of the best home equity loans for self-employed

Check out our reviews of the best lenders offering home equity financing solutions for self-employed borrowers.

Home equity loan vs. HELOC

Before researching lenders, decide how you want to tap into your home equity. Home equity loans and HELOCs both give you increased purchasing power, but they do so in different ways:

Home equity loan	HELOC
Lump-sum payment	Revolving credit line
Consistent, immediate monthly payments	Divided into draw period and repayment period
Usually fixed rates	Usually variable rates

Home equity loans are beneficial if you need to access a large amount at once, but HELOCs provide more flexibility. HELOCs can make more sense if you have variable expenses, and home equity loans offer access to a large lump sum. Repayment is often a fixed amount over a specified time.

If your income fluctuates each month, weigh the benefit of a stable home equity loan payment against the ability to adjust how much you borrow from a HELOC (and thus, how much you need to repay). You may also prefer access to a HELOC to help even out inconsistent income months or seasonal revenue. 

Also, note that Aven and Figure HELOCs require a 100% draw, so even if you only need a certain amount, you must pull your entire available credit line at the beginning. Once you repay the balance, you can borrow on your own schedule like more traditional HELOCs. 

How to choose the best home equity loan or HELOC

If your self-employment income is variable, you might feel more secure with the flexibility of a HELOC. Once you decide on a product, shop around for a lender. It pays to research and find a lender you want to work with. Before choosing a lender, check customer reviews to ensure it will meet your needs.

Lenders and products will vary in many ways, including: 

• Interest rates
• Fee structures
• Processing times
• Loan terms
• Potential discounts

Lenders may have unique processes for verifying income. Look for options that offer methods besides pay stubs and W-9 forms and compare interest rates. Some lenders may charge a higher rate for borrowers who are self-employed to help mitigate the risk of inconsistent income. But it’s not a rule across the board, so compare your loan quotes to choose the best option. 

After settling on a lender, you’ll gather your information for your application. This often includes personal and financial information and your home’s estimated value. Required financial documents may include personal and business bank statements and tax returns.  

Then you’ll need to get your home appraised (your lender will arrange this), and it will complete a hard credit check. Check out our research on the best home equity loans and best HELOCs.

How to apply for a home equity loan or HELOC if you’re self-employed 

Getting a HELOC or home equity loan for self-employed individuals requires more extensive documentation than if you have a more traditional career.  

Like a traditionally employed borrower, you’ll need to prove you meet your lender’s HELOC requirements and have the means to take on and repay new debt. To do so, you may need to  provide a combination of the following:

• Recent bank statements (at least several months’ worth)—could be personal and business if you have separate accounts
• Business and personal tax returns for the past two years
• A statement from your accountant verifying your business’s health
• Business formation documents and proof of ownership (unless you’re a sole proprietor)

Your lender will let you know whether it needs additional income information during the application process. You should also be prepared to submit homeownership and property insurance records. 

Aside from differences in the paperwork involved, the home equity financing application process is the same for self-employed and traditionally employed borrowers. Because home equity loans and HELOCs are personal financing, make sure the funds are deposited into your individual bank account, not a business account.

Approval and funding timelines vary by lender. Getting a home equity loan or HELOC isn’t as fast as getting a credit card, but it can be faster than many business loans, particularly SBA loans. Anticipate the process to take anywhere from a couple of weeks to a couple of months from when you apply to when you can access your funds.

Alternatives to HELOC or home equity loan for a self-employed borrower

If you’re concerned about your chances of approval when you’re self-employed—or if you applied for a loan and were denied—you may be able to secure funding with these HELOC alternatives:

Alternative	Consider if…
Cash-out refinance	You want to extend your mortgage term to lower payments while your business is in growth mode
Home equity sharing agreement	You have less than two years of business income
Home-sale leaseback	You want to stay in your home as a renter until your business is solid enough to buy a new hour
SBA loans	You’re established and want a low-interest loan specifically for your business

Cash-out refinance 

A cash-out refinance gives you quick access to more cash by replacing your mortgage with a bigger one. You’ll repay a new, larger mortgage in exchange for more money in your pocket. You can often find a lower interest rate with a cash-out refinance than a home equity loan or HELOC.

Home equity sharing agreement

A home equity sharing agreement, or home equity investment, gives an investment company a portion of your equity in exchange for a lump sum. Unlike HELOCs and home equity loans, a home equity shared agreement isn’t a form of debt, so it can be easier to qualify. 

Home-sale leaseback

A home sale-leaseback transaction involves a property owner selling their home and then leasing or renting it from the new owner. This option gives those struggling to qualify for a loan access to immediate cash without moving out of their home. 

SBA loan

The Small Business Administration (SBA) offers several financing options for entrepreneurs, including 7(a) loans, 504 loans, and microloans. SBA loans come with specific usage and eligibility requirements, but if you qualify, these business loans can increase your working capital without using your house as collateral.

FAQ

What disqualifies you from getting a home equity loan if you’re self-employed?

If you’re self-employed, a low credit score, insufficient income documentation, high DTI, or low home equity can disqualify you from getting a home equity loan. An unstable financial history, such as inconsistent income or irregular tax filings, may also raise concerns for lenders.

To qualify, you generally need a credit score of at least 620, sufficient proof of consistent income, a DTI below 43%, and at least 15% equity in your home. Meeting these requirements increases your chances of approval.

Can I get a home equity loan without showing income?

It’s unlikely to get a home equity loan without showing any income, especially if you’re self-employed. Lenders typically require proof of income through tax returns, bank statements, or business profit and loss statements to ensure you can repay the loan.

Some lenders may consider alternative forms of verification, such as consistent cash flow or strong home equity, but income documentation is often required to assess your repayment ability.

Is it hard to get a home equity loan if you’re self-employed?

Getting a home equity loan while self-employed can be more challenging due to stricter income verification requirements. Lenders may ask for additional documentation, such as multiple years of tax returns, business profit and loss statements, and detailed bank records to prove stable income.

To improve your chances, maintain a good credit score, keep your DTI low, and ensure your business has consistent cash flow. Choosing a lender experienced with self-employed borrowers can also simplify the process.

How we selected the best home equity loans & HELOCs for self-employed

Since 2018, LendEDU has evaluated home equity companies to help readers find the best home equity loans and HELOCs. Our latest analysis reviewed 850 data points from 34 lenders and financial institutions, with 25 data points collected from each. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.

These star ratings help us determine which companies are best for different situations. We don’t believe two companies can be the best for the same purpose, so we only show each best-for designation once.