How soon can I get a HELOC after buying a home?

Homeownership definitely has its perks. You get to decorate to your own taste, decide how to fix things when they need repairing, and landscape your backyard however you like. 

If you’re like most new homeowners, though, you might be a bit short on cash to pay for those things after all of the closing costs and moving expenses. Here’s where your home itself could help. Now that you’re a homeowner, a home equity line of credit (HELOC) is a potential option when you need to borrow money. 

Can you get a HELOC right after buying a home?

Yes, you can apply for a HELOC right after you buy your home. There aren’t any standard rules saying you have to wait. Even so, every lender makes its own rules, and some require a seasoning period. You might have to be on the title to the home for six months to a year before you’re eligible for a HELOC from a lender with a seasoning requirement.

What do HELOC lenders look for after a recent home purchase?

Lenders look at a lot of different factors when you apply for a HELOC. 

Some will consider how long ago you bought your home, some won’t. Many lenders want to give it some time to see how well you’re able to keep up with your mortgage payments before adding a second mortgage, like a HELOC. 

Achieve Loans, for example, has a six-month waiting period after you buy your house before you’re eligible for a home equity loan or HELOC. 

That’s not the only factor that lenders consider, though. Some other common HELOC lender requirements are:

• Credit score. Most home equity lenders require a minimum credit score in the 600 to 700 range. 

• Income. Your lender will want to verify that you have the ability to repay the loan. In other words, you need to have a stable income, like from a full-time job or guaranteed government benefits. 

• Debt-to-income ratio. Your DTI is the percentage of your income that goes to debts and housing each month. A lower DTI could mean you have some room in your budget for a new loan payment. Most lenders allow a DTI up to 43% and some allow a higher DTI.

• Home equity. You need sufficient equity to borrow against. Home equity is the difference between your home’s value and the amount you still owe on your mortgage. 

For many new homeowners, it’s the amount of home equity you have—not how long it’s been since you got the keys—that has the biggest say in when you’re eligible for a HELOC after your recent home purchase. Let’s dive deeper into how that works. 

How much equity do you need to qualify for a HELOC?

To qualify for a HELOC, you probably need at least 25% equity, but many borrowers have even more. More equity opens up your borrowing options. Here’s how. 

The lender will limit how much you can owe on your home. This limit includes your primary mortgage and your HELOC. It’s called the combined loan-to-value limit and it’s often around 80% or 85% of your home’s value. So if you just bought a home with a 20% down payment and the lender’s CLTV limit is 80%, you don’t have enough equity to get a HELOC from that lender. 

Example:

• Home value: $500,000

• Mortgage balance: $400,000 (giving you 20% equity)

• Room to borrow: 0

Now let’s say you have 25% equity. 

• Home value: $500,000

• Mortgage balance: $375,000

• Room to borrow: $25,000

In this case, you could apply for a $25,000 HELOC, but you could also shop around for a personal loan that meets your needs. Applying for a personal loan is less involved than applying for a HELOC, and if you’re approved, you could get the money within days. Also, you wouldn’t have to offer up your home as collateral (a requirement for HELOCs).

This is why it’s less common to see new homeowners take out a HELOC. They’ve just started repaying their mortgage, and they may not yet have enough home equity.  

How to calculate home equity 

Your home equity is easy to calculate. Subtract your mortgage balance from the value of your home. Get the value from a real estate website. When you apply for a HELOC, the lender will do its own appraisal to determine the value.

The average home buyer made a 14% down payment in 2024. That means a HELOC probably isn’t an option yet.

You can get there faster if you pay down more of your mortgage balance. But that takes time, and that’s why home equity is the real limiting factor for most people looking to take out a HELOC after buying a new home. 

Can you get a home equity loan sooner than a HELOC?

Home equity loan requirements are generally the same as for HELOCs. That means your chances of getting a home equity loan sooner aren’t necessarily better, in general, than getting a HELOC sooner. 

What’s next?

• Calculate your home equity. Look up your current mortgage balance and subtract it from your home’s estimated value. Your home’s appraisal value is a good estimate if you recently bought it. 

• Check your lender’s HELOC requirements. The best way to get familiar with what your lender wants is to ask directly. It’s always free to talk to a Loan Consultant at Achieve Loans and find out if we can meet your needs.

• Put your mortgage payments on autopay. This doesn’t impact your HELOC eligibility directly, but it’s a good way to avoid missing your monthly payments. It shows future HELOC lenders that you can handle paying your home debts as agreed.