What it takes to get a home equity loan

By Gideon Sandford

Reviewed by Kimberly Rotter

Mar 29, 2023

Read time: 5 min

A middle age man and a woman embracing standing in front of a house

Key Takeaways:

  • With a home equity loan, you borrow against your home.

  • Home equity loans may have lower credit score requirements than other loans you’re considering.

  • Once your application is complete, the money is typically available to you in 15-18 days.

Your home is more than just a roof over your head. It might also be the cornerstone of a solid financial plan. A home equity loan can be bigger and easier to qualify for compared to other kinds of loans. Accessing your home’s equity in the form of cash can help you reach your financial goals, whether that’s paying off debts, covering an emergency expense, fixing up your home, or tackling another priority. 

Let’s talk about what it takes to get a home equity loan.

Requirements to get a home equity loan

Home equity

At least 20% of home’s current market value

Credit history

No recent bankruptcies or delinquent accounts

Minimum credit score



Paychecks, tax returns, or other proof of income

Home equity

Your equity in your home is the difference between your home’s current market value and what you owe on your mortgage if you still have one. As you pay down a mortgage or the value of your home increases (or both), your equity goes up. That equity is a valuable asset you can borrow against to consolidate credit card debt, pay for repairs and renovations, or cover emergency expenses.

Most lenders won’t loan 100% of your home’s value even if you own it outright. It’s more common for lenders to limit your total debt to around 80% of the current market value. That 80% limit includes your first mortgage. 

For example, let’s say you own a home worth $400,000. If the lender’s limit is 80%, your total debt can be up to $320,000. If you still owe $200,000 on your mortgage, you could apply for a $120,000 home equity loan. 

Credit history 

Three major credit bureaus track your credit history: Experian, Equifax, and Transunion. They all collect similar information about your experience with credit.

Most information on your credit report goes back 7–10 years. The most recent two years have the most influence on your credit score. Your credit report will show:

  • Your credit accounts, including accounts in good standing that were closed within the last 10 years

  • What type of account each one is (personal loans, auto loans, credit cards, etc)

  • The percentage of your total credit you’re currently using

  • The amounts of your recent payments

  • Whether you’ve paid late or defaulted

  • Whether you’ve applied for other new credit accounts recently

If you have overdue payments, try to catch up on those payments before applying for a home equity loan. Late payments are a red flag for any lender. 

Credit score

When you apply for a loan, your lender will also look at your credit score. There are different credit scores, but the most common one is FICO, which ranges from 300 to 850. Different lenders have different credit score requirements. 

How you plan to use your home equity loan affects the credit score you’ll need. If you are going to consolidate existing debt, then you may qualify with a credit score as low as 640. If you’re going to use the home equity loan to withdraw cash for new or ongoing costs like a home renovation, then your lender might require a higher credit score.


Even with a high credit score, lenders will want to make sure you have enough income to make the monthly payments on a home equity loan. You can tell the lender about your wages, Social Security, alimony, child support, investment income, or any other income you want to use to help you qualify.

To get a home equity loan, you’ll need enough income to cover any mortgage, student loans, car loans, and other loans you have in addition to your desired loan payment. Your current credit card debts won’t be a factor, though, if the lender will pay them off directly.  

What goes into your home equity loan application

To get started with a home equity loan application, you’ll need to provide a few documents. The lender will verify your identity, and look at your income, your credit score, and your home’s value.


You’ll provide your Social Security number, and if you apply with a co-borrower, they’ll need to provide theirs as well. You’ll show a photo I.D. when you sign your loan documents.


You’ll have to document your income. You can use recent pay stubs if you have a job. If you’re self-employed, you may be able to use tax returns or other documents to prove your most recent income. If you’re using Social Security, alimony, or child support to apply, then you'll be asked to document that as well. The more income you can show, relative to your expenses, the more of a monthly payment you can qualify for. Sometimes co-owners apply together, using both people’s incomes so that they can get a bigger loan than either would qualify for alone. 


Your lender will check your credit report and credit score. Before you apply, you should check your own credit reports and review them for errors. Each credit bureau has to provide you with free access to your credit report once every year.

Appraisal and title

As part of the process of reviewing your loan application, the bank or credit union making your home equity loan will verify property records to make sure you own your home, and that you’ve included any co-owners on your loan application.  Anyone named on the title to the home will either need to be included on the loan or sign something that says they agree to the loan. The lender will also check your home’s current value, using a professional appraiser.

Loan documents

Once you’re approved, the bank or credit union will write a contract for you to sign, either electronically or in person. If you’re consolidating existing debt, they may use the loan to pay off your other creditors directly. Otherwise, they’ll deposit the funds into your bank account or mail you a debit card or paper checks. 

Depending on your situation, the whole process can take as long as a few weeks or as little as 10 days. Most home equity loans take an average of 15–18 days to fund.

Homeowners, get help with your high-interest debt

Use the equity in your home to consolidate debt, lower your monthly payments, and reduce your stress.

Alternatives to home equity loans

If you don’t qualify for a home equity loan or you decide you don’t want one, you have a few other options.

Unsecured personal loan

An unsecured personal loan could help you reach your financial goals. Unsecured personal loans are typically smaller and cost a little more than loans secured by property, and the time to repay the loan may be shorter. But you can qualify based on your creditworthiness, not on what or how much you own. Plus, the rate on a personal loan could be well below what you’re currently paying on credit card debt, so it’s worth considering if debt consolidation is your goal. A personal loan can help give you a definite timeline to pay off your bills and be debt-free.

Debt resolution

If you’re overwhelmed by your debt and you know you won’t be able to pay it off, you could look into debt resolution. Debt resolution is negotiating with your creditors to accept less than the full amount you owe. You can do this yourself or hire a professional debt resolution company to help you. For some people, debt resolution makes more financial sense than bankruptcy. 

Gideon Sandford

Gideon is a financial expert who writes about financial planning, access to credit, and debt strategies. He has over a decade of experience helping readers manage their money and use debt responsibly.

kim rotter 2022 2

Kimberly is Achieve’s senior editor. She is a financial counselor accredited by the Association for Financial Counseling & Planning Education®, and a mortgage expert for The Motley Fool. She owns and manages a 350-writer content agency.

Frequently asked questions

The most accurate way to find out the value of your home is to hire a property appraiser. Fortunately, there are free and low-cost alternatives. Zillow and Redfin, for example, are websites that use recent sale prices near you to estimate the value of your home without a professional appraisal. This is a good way to get a ballpark value in mind.

Your debt-to-income ratio is a measure lenders use to decide how much more debt you can afford to take on. Your debt-to-income ratio is all your monthly debt payments divided by your gross (after-tax) monthly income. Here’s an example:

Monthly income


Mortgage payment


Car payment


Student loan payment


Total debt payments


Debt-to-income ratio


To qualify for a home equity loan, lenders usually look for a debt-to-income ratio of 43% or less. If you’re using the loan to pay off existing debt, then lenders may use your DTI after the debt consolidation.

A home equity loan lets you borrow against your home’s value. You pledge something valuable (your home) as a guarantee that you’ll repay your loan. Since your home serves as collateral, home equity loans (as well as home equity lines of credit) usually have lower interest rates than credit cards and other unsecured personal loans that aren’t backed by anything of value. If you have balances on credit cards, personal loans, or other loans, a home equity loan may let you consolidate those balances into a single payment at a lower interest rate.

Yes, it's possible to obtain a HELOC with a fixed interest rate. While most HELOCs have a variable interest rate, some lenders offer fixed-rate options. Choosing a fixed-rate HELOC can provide stability and predictability since you won't have to worry about fluctuations in interest rates, making it easier to plan and manage your finances.

If you're a homeowner needing funds, a Home Equity Line of Credit (HELOC) with a fixed interest rate can be a great option. With a fixed rate, your interest rate will stay the same throughout the loan's life, making it easier to budget your monthly payments. Also, a HELOC can be a flexible and convenient way to access cash for home improvements, debt consolidation, or other expenses without affecting your first mortgage rate or terms.

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Use the equity in your home to consolidate debt, lower your monthly payments, and reduce your stress.

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