How to Apply for a HELOC in 5 Steps

A home equity line of credit (HELOC) provides ongoing access to credit, making it an excellent option for homeowners looking to consolidate debt, finance home renovations, pay for medical expenses, and more. 

If you’re thinking about borrowing against your home equity, here’s how to apply for a HELOC to ensure you get the best deal possible. 

Table of Contents

1. 1. Shop around
2. 2. Choose a lender
3. 3. Apply
4. 4. Complete underwriting and appraisal
5. 5. Close on the loan

1. Shop around

To start, prequalify for a HELOC with at least a few lenders. The process typically only requires a soft credit check, but it can give you an idea of how much you may be able to borrow and the terms for which you’re eligible. 

You can prequalify with individual lenders, or you can use an online marketplace—LendingTree is our favorite—to prequalify with multiple lenders at once. Here’s the kind of information you may need to provide:

• Property type (e.g., primary residence, second home)
• ZIP code
• Loan purpose
• Home value
• Mortgage status and balance
• Desired credit limit
• Estimated credit score
• Personal details (e.g., name, date of birth, contact information)
• Residential address

It’s important to note that most HELOCs have a variable interest rate that fluctuates based on economic conditions. However, some give you the option to lock in a fixed rate for some or all of your balance. 

The minimum credit score to get approved for a HELOC is generally 620, but some lenders may have higher requirements. Consider checking your credit score before starting the process to determine whether you need to take steps to improve it first. 

2. Choose a lender

As you compare your prequalification offers, you’ll want to choose a lender that offers terms that work for you based on your creditworthiness and equity value. Here are several features to focus on during this process:

• Loan limits: Lenders will indicate the maximum amount you can borrow, including a maximum loan-to-value limit. You should also look at the minimum amount you’ll need to take with your first draw. 
• Interest rates: Compare interest rate offers and other rate features, such as the option for a fixed-rate conversion. 
• Fees: Some HELOCs charge closing costs, annual fees, draw fees, inactivity fees, and a prepayment penalty if you close the line of credit within the first few years. Fixed-rate conversions might also incur an upfront charge.
• Repayment terms: HELOCs typically give you a draw period ranging from five to 10 years and a repayment period of up to 20 years. Choose a lender that offers terms that work for your situation and goals. 

When my clients compare HELOC lenders and terms, I recommend that they:

1. Consider the interest rate environment

2. Ask whether there is an option to lock in a HELOC fixed rate (at a reasonable rate) when interest rates are expected to increase

3. Understand the draw period and repayment period timelines. 

It is also important to reasonably ensure that my client can meet the lender’s requirements for approval.

Erin Kinkade, CFP®

Reading customer reviews online can give you an idea of what your experience will be like with a particular lender. According to our editorial ratings, for instance, the AvenCash HELOC earns the best customer reviews. Here are more of our top recommendations for the best HELOC:

3. Apply

Once you’ve chosen a lender, you may be able to complete an application online, by phone, or in person. Before you start, it’s important to gather your documentation. Common required documents and other information include:

• Full name, date of birth, and Social Security number.
• Email address and phone number.
• Current and previous addresses (depending on how long you’ve lived in your current home).
• Current and previous employers, including names and addresses.
• Copy of a government-issued photo ID, such as a driver’s license or state ID card.
• Recent pay stubs.
• W-2 forms for the previous two years.
• Tax returns for the previous two years (if self-employed).
• Recent bank statements (if self-employed).
• Documentation for other forms of income, such as retirement, Social Security, disability, pension, alimony, and child support.
• Copy of your most recent mortgage statement.
• Copy of your most recent property tax bill.
• Insurance declarations for homeowners insurance, flood insurance, and title insurance 

Applying for a HELOC may take just 15 minutes, but the lender may take two to four weeks to underwrite your application and approve you for closing. 

This timeline varies by lender and can depend on how long it takes you to provide any documents the lender requests. The more prompt you are when submitting documentation, the faster the process will go. 

Early disclosure form

Before finalizing, you’ll receive an early disclosure form outlining several terms, including the length of your draw period and fees associated with the HELOC. You’ll also get details about:

• How the annual percentage rate (APR) is calculated and the maximum APR.
• The conditions under which the lender can terminate your reduce your credit line.
• How your variable or fixed APR will affect your payments.
• The consequences of nonpayment.
• Minimum transaction requirements.

It’s crucial that you read through this disclosure to make sure you understand what you’re agreeing to at closing.

4. Complete underwriting and appraisal

While you’re providing documentation during the underwriting process, you may also need to agree to an appraisal of the property. The appraisal tells the lender how much the home is worth.

Lenders may use a few different types of appraisals:

• Automated value model (AVM) appraisal: Figure and other lenders use an AVM appraisal system, which reviews local property values and sales data to determine your home’s expected market value. 
• Drive-by appraisal: Also known as a broker’s price opinion, a drive-by appraisal involves an appraisal taking pictures of the exterior of your property to assess its condition and the surrounding neighborhood. It also uses local sales and value data to support its determination.
• Walkthrough appraisal: The most comprehensive option, a walkthrough appraisal is a common requirement for more conservative lenders. It involves a comprehensive review of your home, both inside and out, along with neighboring properties. While more expensive and time-consuming, this one may be beneficial if you’ve made recent upgrades.

Ultimately, the appraisal process helps determine how much you can borrow with the HELOC. The lender will review the market value and other outstanding debts on the property to make this decision.

5. Close on the loan

The closing process for a HELOC can vary depending on which lender you work with. But in general, your lender will provide all your closing documents for review and ask for your preferred location to close.

Note that some lenders may require closing costs, which will be included in the disclosures. Make sure you bring the following with you:

• Two forms of identification, one of which must be a photo ID (e.g., driver’s license, state ID, or passport).
• Payment for closing costs (if applicable) in the form of a cashier’s check or certified check.
• A voided check to set up automatic payments. 

During the closing process, you’ll review the HELOC terms and conditions, including factors that affect your interest rate, the initial draw, and other features. Then you’ll sign the loan documents with a notary present. 

After closing, a three-day rescission period applies, during which you can cancel the agreement. After that’s complete, you’ll begin your draw period. Depending on the lender, the minimum initial draw may be a fixed amount or a percentage of the total credit limit. In some cases, it’s 100% of your available credit. 

Prepare to apply for a HELOC

From start to finish, it generally takes two to four weeks to get a HELOC. To improve your odds of securing favorable terms and a faster closing time, it’s important to maintain a good credit score, respond to your lender’s questions, and provide the required documentation promptly. 

As you prepare for the application process, take time to research and compare our top choices for the best HELOC lenders. Be sure to use our home equity calculator to get a general idea of how much you might be able to borrow.