Home Equity Loan and Line of Credit Requirements in 2025

Building equity is one of the biggest perks of owning a home. As of September 2025, the average homeowner with a mortgage had about $307,000 in equity—enough to make anyone wonder if it’s time to tap into their home’s value.

If you’ve ever played Monopoly, you already get the basic idea. A home equity loan is like taking out a second mortgage, and a HELOC, while also a second mortgage, is a line of credit backed by your home. But before you start planning what to do with that money, you have to qualify.

In other words: don’t pass Go just yet. Here’s what lenders look for when approving a home equity loan or HELOC.

Table of Contents

1. What are the requirements for a home equity loan or HELOC?
   1. Credit score
   2. Income
   3. Debt-to-income
   4. Equity
2. Home equity loan alternatives

What are the requirements for a home equity loan or HELOC?

Generally speaking, the requirements for a home equity loan or HELOC include good credit, steady income, and a minimum amount of equity. Here’s a checklist of what lenders typically look for:

• Credit scores: 620 minimum for home equity loans; 720 minimum for HELOCs
• Proof of income: Pay stubs, bank statements, W-2s, tax returns
• Debt-to-income (DTI): 43% or less
• Home equity: 15%-20% 

Having just one of these things is not a get out of jail free card; you’ll need to check all of a lender’s boxes to meet home equity loan qualifications. Now, let’s dig into how each factor affects your home equity loan application and approval odds.

What credit score is needed for a home equity loan?

The minimum credit score needed for a home equity loan typically starts at 620. Some lenders may set the bar higher; Spring EQ, for example, prefers a score of 680 or better. HELOC credit requirements may be even more stringent, with lenders expecting a minimum score of 720.

Credit scores matter for more than just home equity loan approval; they also affect the interest rate you’ll pay. Assume two borrowers apply for a $50,000 home equity loan with a 10-year repayment term through LendingTree. Borrower A has a 760 credit score, while borrower B’s score is 640. 

Here’s how their loan terms might compare.

	Borrower A (760 Score)	Borrower B (640 Score)
Interest rate	7.99%	12.99%
Monthly payment	$606.37	$746.26
Total interest paid	$22,764.86	$39,551.06
Loan cost	$72,764.86	$89,551.06

A higher credit score trims $140 off your monthly payment, but more importantly, it saves you $17,000 in interest. 

What income is needed to qualify for a HELOC or home equity loan?

Credit scores tell lenders how well you manage debt, but they also want to see that you have reliable income to make the monthly payments on a home equity loan. There’s no minimum income threshold you need to have to qualify for a home equity loan, but you may need multiple documents to show your earnings.

Lenders may ask for copies of:

• One to two months’ worth of pay stubs
• One to two months’ worth of bank statements showing direct deposit
• W-2s for the most recent tax year
• Tax returns for the most recent tax year

The income requirements for a HELOC are no different; you’ll need to be able to show that you can make your loan payments. 

What if you’re self-employed, freelance, or do gig work? Instead of one year of tax returns, your lender might ask for two. And you may need to provide a recent profit-and-loss statement and cash flow statement if you run a business. 

Can you get a home equity loan with debt?

You can get a home equity loan or HELOC if you have debt. The lender will check your debt-to-income (DTI) ratio to see how much strain credit cards or other debts are putting on your income. DTI measures the percentage of your gross income goes to debt repayment each month.

The DTI formula looks like this: Debt payments/Gross income x 100 = DTI

Here’s how to calculate your DTI for a home equity loan or HELOC:

• Total up your monthly debt payments, including your mortgage, credit cards, student loans, and anything else you owe
• Add up your gross pay (you can find this on your pay stubs if you have a 9 to 5)
• Divide your debt payment total by your gross income, then multiply by 100

For example, say you pay $1,500 to debt each month and your gross pay is $5,000. If you use the formula above, your DTI ratio comes out to 30%. 

So, what is a good DTI for a home equity loan or HELOC? Generally, lenders want this number to be 43% or less. Some lenders may go up to 50% if you have what are called “strong compensating factors”, which means excellent credit or significant income. 

You can get your DTI down to meet HELOC loan requirements by paying off some of your credit card balances. Even knocking out one or two small balances could make enough of a difference in your ratio to make you appear less risky to lenders. 

Equity requirements for home equity loans and HELOCs

Lenders usually expect you to have 15% to 20% equity in your home to qualify for a home equity loan. Equity is the difference between what you owe on your home and its fair market value. When you apply for a home equity loan or HELOC, the lender will schedule an appraisal to determine what the home is worth. 

Use these steps to figure out how much equity you have:

• Find your home’s estimated value using a site like Zillow or Redfin
• Check your most recent mortgage statement for the outstanding balance
• Subtract your home’s value from the mortgage balance

The difference is your equity. A home equity calculator can make doing the math a breeze. 

Aside from equity, lenders are also interested in your loan-to-value (LTV) ratio and your combined LTV. Here’s what those terms mean:

• Loan-to-value ratio is your loan balance divided by your home’s appraised value. 
• Combed LTV is your loan balance, including the home equity loan you want to get, divided by your home’s appraised value. 

A good LTV for a home equity loan is generally 80% or lower, though some lenders may accept a higher number. The range for CLTV is usually 80% to 85%. What you need to know about these numbers is that they help the lender assess risk and decide whether to approve you for a home equity loan. 

Home equity loan alternatives

If you don’t meet home equity loan or HELOC qualifications, or simply want to know what other loan options exist, there are a few other ways to get the money that you need. 

• Cash-out refinance: A cash-out refinance replaces your current mortgage with a new one, and lets you withdraw your equity in cash at closing. You might consider this option if you want to change your mortgage terms. 
• Personal loans: Personal loans let you borrow a lump sum and repay it at a fixed rate. Most personal loans are unsecured, which means you don’t need any collateral to get one. 
• Credit cards: Credit cards can help you cover large purchases or emergencies in a cash shortfall. If you’re considering a credit card as an alternative to a HELOC, look for one that offers a low or 0% introductory APR. 

Home equity loan and HELOC requirements can seem a little confusing until you understand what lenders are looking for. If you’re ready to see what kind of loan terms you might qualify for, you can start by researching the best home equity loans and HELOC lenders.