Credit Score Requirements for HELOCs
According to Experian, borrowers likely need a FICO Score of at least 680 to qualify for a HELOC, but some lenders may prefer a credit score of 720 or more.
Borrowers with credit scores below 680 may have a more difficult time qualifying for a HELOC. It's important to note that lenders also consider a borrower's credit history in addition to their score. A history of late payments or negative credit events can make it harder for borrowers to qualify for a HELOC.
Most lenders require a HELOC credit score requirement in the mid 600s. Some lenders may require a higher score and some lenders may accept a lower score. The higher your credit score, the better (lower) the interest rate you'll be offered on a HELOC and other loans.
The bottom line. Though a HELOC can be difficult to secure with a 580 credit score, it could still be possible. However, you'll likely pay a lot more in interest if you're approved.
Home buyers with a credit score at or above 580 can borrow up to 96.5% of a home's value. While borrowers with credit scores of 500 – 579 may still qualify for an FHA loan with a 10% down payment, many lenders have their own minimum credit score requirements.
HELOC requirements
You should expect to meet the following HELOC loan requirements: Minimum 620 credit score. You'll need a minimum 620 score, though the most competitive rates typically go to borrowers with 780 scores or higher. Debt-to-income (DTI) ratio under 43%.
What is the monthly payment on a $50,000 HELOC? Assuming a borrower who has spent up to their HELOC credit limit, the monthly payment on a $50,000 HELOC at today's rates would be about $372 for an interest-only payment, or $448 for a principle-and-interest payment.
Yes. This is the case for home equity related financial products such as fixed rate home equity loans, home equity lines of credit (HELOCs), and cash out refinances. Lenders require an appraisal for home equity loans to protect themselves from the risk of default.
A home equity line of credit or HELOC is another type of second mortgage loan. Like a home equity loan, it's secured by the property, but there are some differences in how the two work. A HELOC is a line of credit that you can draw against as needed for a set period of time, typically up to 10 years.
A high DTI can be a significant obstacle in getting approved for a HELOC and a HELoan. Most home equity lenders look for a DTI ratio no greater than 43 percent, and the median DTI of a HELOC borrower was 41 percent in Q1 2024 according to HMDA data.
There isn't a set income requirement for a HELOC or home equity loan, but you do need to earn enough to meet the DTI ratio requirement for the amount of money you're hoping to tap. You'll also need to prove that you have income consistently coming in.
Using a HELOC to fund a vacation, buy a car, pay off credit card debt, pay for college, or invest in real estate is not a good idea.
HELOC payment examples
For example, payments on a $100,000 HELOC with a 6% annual percentage rate (APR) may cost around $500 a month during a 10-year draw period when only interest payments are required. That jumps to approximately $1,110 a month when the 10-year repayment period begins.
On the downside, HELOCs have variable interest rates, so your repayments will increase if rates rise. Another risk: A HELOC uses your home as collateral, so if you don't repay what you borrow, the lender could foreclose on it.
The LTV ratio is the loan amount divided by the property's appraised value. For example, if you have a $100,000 mortgage and your home is appraised at $200,000, your LTV ratio would be 50%. Lenders generally approve HELOCs if your LTV ratio is around 80% or less.
However, the average time from application to approval for a HELOC is around 2 to 6 weeks. Underwriting is generally the part of the process that takes the longest, which can be anywhere from a week to 30 days or longer.
Closing costs for a HELOC are often a bit lower than the costs of closing a primary mortgage, but the average closing costs for a home equity line of credit (depending on the lender and the loan product) can add up to between 2 percent and 5 percent of the total loan cost.
The average HELOC interest rate is currently 9.16%. If you took out a HELOC, and your interest rate remained the same for the life of the credit line (with a 15-year repayment period), you would pay $307.14 per month.
You can pay off your HELOC early, but be mindful of pre-payment fees, if any. If you have a Citizens HELOC, you're in luck as Citizens does not charge pre-payment fees. HELOCs allow you to make interest-only payments during the draw period, then transition to principal and interest payments during the repayment period.
To qualify for a HELOC, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. You can typically borrow up to 85% of the value of your home minus the amount you owe.
Often, HELOC denial is due to factors within your control, such as a low credit score, insufficient home equity or poor debt-to-income ratio. You may also be denied because you have an unstable employment or income history—meaning you haven't made enough money consistently to be considered low-risk.
Requirements to get a HELOC
To qualify for a HELOC, you'll need a FICO score of 660 or higher. U.S. Bank also looks at factors including: The amount of equity you have in your home. Your credit score and history.