How to Qualify for a Home Equity Loan in 2026
Updated: January 27 2026 • 6 min read
AUTHOR: (SizeLimitingPyMap: {bio=<div style="color: #374151; line-height: 1.75;">
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<p><span>Bennett Leckrone is the editorial manager and an analyst for Lower. He specializes in making complicated mortgage topics accessible for consumers. That includes both in-depth product guides and in-depth analysis on what economic moves mean for homebuyers and refinancers.</span></p>
<p><span>He was previously a business reporter with a focus on higher education and fintech at BestColleges. In that role, he reported on the development of fintech and AI curriculum, as well as the rapidly changing nature of finance education. He also wrote guides to help business students navigate AI and online education.</span></p>
<p><span>He also reported on state politics at Maryland Matters, with a focus on how policy affected people and businesses. He holds a bachelor of science in journalism degree from Ohio University.</span></p>
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REVIEWER: (SizeLimitingPyMap: {bio=<p><span>Neel Patel is a mortgage industry professional with more than a decade of hands-on experience across loan origination, customer experience, sales operations, and strategy. He has worked at every stage of the mortgage lifecycle, from advising individual borrowers to leading teams of loan officers. </span></p>
<p><span>As an expert reviewer, Neel evaluates mortgage and personal finance content for accuracy, clarity, and real-world applicability. He specializes in ensuring information reflects how lending actually works in practice so consumers can make confident, informed decisions.</span></p>, hs_child_table_id=0, hs_created_at=1770998587713, hs_created_by_user_id=85123122, hs_deleted_at=0, hs_id=207521716567, hs_initial_published_at=1770998795717, hs_is_edited=false, hs_name=Neel Patel, hs_path=neel-patel, hs_published_at=1770998795717, hs_updated_at=1770998733653, hs_updated_by_user_id=85123122, name_first_last=Neel Patel, profile_picture={url=https://19577492.fs1.hubspotusercontent-na1.net/hubfs/19577492/Neel%20Patel%20Cropped%204.jpg, width=1638, height=2048, altText=Neel Patel, fileId=207528140173, type=image}, tags=[{id=2, name=reviewer, label=Reviewer, isHubspotDefined=false, labelTranslations={}, type=option, createdAt=1770043811028, createdByUserId=83124684, createdBy={id=83124684, email=shilyard@lower.com, firstName=Shawn, lastName=Hilyard}, updatedAt=1770043811028, updatedByUserId=83124684, updatedBy={id=83124684, email=shilyard@lower.com, firstName=Shawn, lastName=Hilyard}, order=1}]})
Written by
Bennett Leckrone
Writer / Reviewer / Expert
Reviewed by
Neel Patel
Reviewer
Key Takeaways
- You’ll need equity built up to qualify for a home equity loan, but the exact amount varies by lender.
- You’ll also need to meet lender debt-to-income ratio requirements. A DTI below 35% is considered very strong, but DTIs up to 43% or higher can qualify depending on the situation.
- Many lenders require a credit score of 620 or higher to qualify for a home equity loan. A lower credit score might mean stricter terms and higher rates.
Tap into more home equity than almost any other lender.
Lenders generally look at three pillars when determining your eligibility for a home equity loan: How much equity you have, your credit score, and your ability to repay.
Whether you’ll qualify will depend on both lender requirements and your unique financial situation, but here’s an overview on what it generally takes to qualify for a home equity loan:
How to Find Out if You're Eligible for a Home Equity Loan
A home equity loan lets you borrow against the portion of your home you own free and clear, delivering a single lump sum you repay over a set term at a fixed interest rate and fixed monthly payment, according to the CFPB’s explainer on home equity loans.
This structure is attractive when you know your budget and want certainty on costs month to month.
Eligibility generally hinges on:
- Equity and loan-to-value: Lenders cap how much you can borrow based on your home’s value and current mortgage balances.
- Credit profile: Your score, payment history, and utilization affect approval and pricing.
- Ability to repay: Debt-to-income (DTI), income stability, and documentation drive underwriting decisions.
While home equity loans generally come as a single lump sum that’s repaid with a fixed rate, a HELOC is a flexible alternative. Instead of one lump sum, a HELOC works like a revolving line with a draw period and interest-only payments on what you use.
HELOC rates can be variable or sometimes fixed on specific draws.
As a safeguard, most borrowers have a three-business-day right to cancel certain home equity loans after closing, per FTC guidance on home equity loans.
Calculate Your Home Equity
Loan-to-value (LTV) compares your existing mortgage balance to your home’s current market value.
Combined loan-to-value (CLTV) adds the proposed home equity loan to your existing mortgage to see total secured borrowing against the home.
Most lenders want you to retain at least 15% to 20% equity, effectively capping LTV/CLTV at 80 to 85%, although some niche programs stretch to 90% or higher.
Here’s an example of how CLTV works:
- Home value: $400,000
- First mortgage balance: $200,000
- 80% LTV cap = $320,000 total allowed liens
- Potential maximum new loan = $320,000 − $200,000 = $120,000
To confirm value, lenders may order a full appraisal or use automated valuation models (AVMs) depending on policy and loan size.
Here are some common LTV/CLTV caps and what they mean:
|
Max CLTV cap |
What it typically means for you |
|
80% |
Widely available, competitive pricing, stronger approval odds |
|
85% |
Fewer lenders, solid credit and DTI needed |
|
90% |
Very few lenders, might require stricter underwriting |
LTV caps depend on your home’s equity. You can use our home equity calculator to get a better idea of what that means for you.
Home Equity Calculator
Estimate your equity today and model how it could change over time based on mortgage payoff and optional home appreciation.
Your Results
| Year | Home value | Mortgage | Equity | LTV |
|---|
| Month | Payment | Principal | Interest | Balance |
|---|
This tool estimates equity today and projects equity over time using two building blocks: home value and mortgage balance.
1) Equity
Equity = Home value − Mortgage balance
2) Home value over time (optional appreciation)
If “Include annual home appreciation” is checked, the calculator compounds home value each year:
Future home value = Today’s value × (1 + a)y
where a is the annual appreciation rate (as a decimal) and y is years in the future. If appreciation is unchecked, the tool uses a = 0.
3) Mortgage balance over time (amortization)
The mortgage projection assumes a standard fixed-rate loan on your current remaining balance with years remaining.
Monthly payment = P × r × (1 + r)n / ((1 + r)n − 1)
where P is today’s mortgage balance, r is the monthly interest rate (APR/12), and n is the number of remaining payments (years remaining × 12).
Each month, interest is calculated on the remaining balance and the rest of the payment reduces principal:
Interest = Balance × r
Principal = Payment − Interest
New balance = Balance − Principal
4) What the “Key years” table shows
For Year 0, a midpoint year, and the final year, the calculator: (a) estimates home value, (b) estimates remaining mortgage balance after y years, then (c) computes equity and loan-to-value (LTV).
LTV = Mortgage balance / Home value
Put your equity to work.
What Credit Score Do You Need for a Home Equity Loan?
Many home equity loan lenders set credit score minimums in the 620 to 680 range for home equity loans. Scores of 700–740+ may unlock better rates or higher LTVs, while scores below 620 can reduce approval odds or lead to higher pricing.
Getting a home equity loan with bad credit is possible depending on your circumstances, but you might face tighter requirements.
Here’s how to optimize your credit score before you apply:
- Pull your free credit reports, dispute any errors, and monitor score changes.
- Pay down high revolving balances to improve utilization.
- Keep accounts current; avoid late payments for at least six months.
- Pause new credit applications until your loan closes.
What Debt-to-Income (DTI) Do You Need for a Home Equity Loan?
Debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes to required debt payments—your mortgage, credit cards, student loans, auto loans, and other obligations. Many providers look for a DTI at or below 43% for eligibility, with the most competitive pricing often under 40%, as summarized by The Mortgage Reports.
Income stability matters, too. Expect to verify with recent pay stubs and W-2s, or two years of tax returns and year-to-date financials if self-employed. Consistent on-time housing payments strengthen your profile, per the CFPB’s explainer on home equity loans.
DTI impact on qualification:
|
DTI range |
Likely outcome |
|
≤ 35% |
Strong approval odds; best-rate potential |
|
36%–40% |
Generally acceptable; competitive offers likely |
|
41%–43% |
Eligible with compensating strengths (credit, equity) |
|
> 43% |
Approval less likely; consider debt reduction or alternatives |
You can use our DTI calculator to get an idea of your personal situation.
Debt-to-Income (DTI) Ratio Calculator
Compare your total monthly debt payments to your annual income (before taxes) and see how your DTI stacks up.
How this calculator works
Debt-to-income ratio (DTI) compares your total monthly debt payments to your gross monthly income.
This calculator converts annual income into monthly income:
Gross monthly income = Annual income ÷ 12
Then it computes:
DTI (%) = (Total monthly debt ÷ Gross monthly income) × 100
DTI categories used here: Good (35% or less), Acceptable (36% to 43%), Need Work (above 43%).
Your results
Find out what you qualify for.
Documents You Need to Apply for a Home Equity Loan
Lenders verify your ability to repay and the property securing the loan. You should organize both digital and paper copies to speed up the process.
Here are some commonly required documents to apply for a home equity loan, although additional might be required:
- Recent pay stubs and W-2s (or two years of tax returns if self-employed)
- Bank statements (typically 1–2 months)
- Current mortgage statement and property tax bill
- Proof of homeowners insurance
- Government ID and Social Security number
- Signed authorization for credit and income verification
You should also budget for closing costs, which often come to about 2% to 6% of the loan amount. Closing costs cover appraisal, title, and origination fees.
The Bottom Line
There are three main pillars that determine your eligibility for a home equity loan: Your home equity, your credit score, and your ability to repay.
Lenders usually require you to have built up equity in your home and a fair debt-to-income ratio to qualify for a home equity loan, but exact requirements vary by lender.
Frequently asked questions about qualifying for a home equity loan
What credit score is needed to qualify for a home equity loan?
Most home equity loan lenders require a minimum credit score of 620–680, and higher scores can help you qualify for better rates and higher borrowing limits.
How much home equity do I need for a home equity loan?
You generally need at least 15–20% equity, with most lenders capping total LTV/CLTV around 80–85% and some stretching to 90% with stricter requirements.
What documents are required to apply for a home equity loan?
Expect recent pay stubs, W-2s or tax returns, bank statements, your current mortgage statement, and proof of homeowners insurance.
Does applying for a home equity loan require an appraisal?
Many lenders require an appraisal to verify value, though some may use automated valuation models depending on the loan and policy.
Can I qualify for a home equity loan if I am self-employed?
Yes—plan to provide two years of tax returns, year-to-date financials, and other proof of consistent income.
What is a debt-to-income ratio, and why does it matter?
DTI compares your monthly debt payments to gross monthly income; most lenders want 43% or less for approval.
Are closing costs required for a home equity loan?
Yes—budget for closing costs typically ranging from 2% to 6% of the loan amount.