What credit score do you need for a home equity loan or HELOC?

Most lenders require a minimum credit score of 620 for a home equity loan or HELOC, but you'll need 700 or higher to qualify for the best rates. Lenders below 640 are considered high-risk and face either denial or significantly higher rates (1%–2% above prime). Credit score affects both your approval odds and the margin your lender charges above the prime rate on a HELOC.

How much home equity do you need to borrow against?

Most lenders require you to retain at least 15%–20% equity in your home after taking out the HELOC or home equity loan. This means your combined loan-to-value (CLTV) — your mortgage balance plus the new loan — cannot exceed 80%–85% of your home's appraised value. On a $400,000 home with an 85% CLTV limit: maximum combined debt = $340,000. If your mortgage balance is $270,000, you can borrow up to $70,000.

What debt-to-income ratio do you need for a home equity loan?

Most lenders cap DTI at 43% for home equity products, though some lenders accept up to 50% for well-qualified borrowers. DTI is calculated as your total monthly debt payments (including the proposed new payment) divided by gross monthly income. Lenders typically calculate DTI using the fully amortized repayment-period payment for a HELOC — not the interest-only draw-period payment — which means your qualifying DTI may be higher than expected.

Can you get a home equity loan with bad credit?

It's difficult but not impossible. Some lenders offer home equity products down to a 580 credit score, but rates are significantly higher and maximum LTV is typically capped at 75%–80% rather than 85%. A credit score below 620 typically means either denial from mainstream lenders or terms that aren't cost-effective. If your credit score is below 680, consider spending 6–12 months improving it before applying — even a 40-point increase can reduce your rate by 0.5%–1.5%.

Home Equity Requirements 2026 — What You Need to Qualify

To borrow against your home equity in 2026, you need to meet five core requirements: sufficient equity (typically at least 20% remaining after the loan), a credit score of 620 or higher, a debt-to-income ratio below 43%, verifiable income history, and a property type that lenders will accept. Most lenders cap your combined borrowing at 85% of your home’s value, leaving at least 15% equity as a cushion. Here’s exactly what each requirement means.

The 5 Core Requirements at a Glance

Requirement	Minimum	Preferred
Home equity remaining after loan	15%	20%+
Combined loan-to-value (CLTV)	85% max	80% or below
Credit score	620	700+
Debt-to-income ratio (DTI)	43%	Below 36%
Income history	1–2 years verifiable	2+ years, stable

Requirement 1 — Home Equity (CLTV)

The most fundamental requirement: you must have enough equity to borrow against and still meet the lender’s maximum combined loan-to-value ratio.

CLTV Formula: CLTV = (Mortgage Balance + New Loan Amount) ÷ Appraised Home Value

Maximum CLTV by lender type:

Most banks and credit unions: 85%
Some online lenders: up to 90%
Conservative lenders: 80%

How much you can borrow by home value and mortgage balance:

Home Value	Mortgage Balance	Max CLTV	Max Home Equity Loan/HELOC
$300,000	$180,000	85%	$75,000
$400,000	$250,000	85%	$90,000
$500,000	$300,000	85%	$125,000
$600,000	$380,000	85%	$130,000
$400,000	$320,000	85%	$20,000

Note: The appraised value matters more than the Zillow estimate. The lender orders a formal appraisal; if it comes in below your expectation, your available equity shrinks.

Requirement 2 — Credit Score

Credit Score	Likely Outcome
760+	Best rates available; strong approval odds
700–759	Good rates; likely approval at most lenders
660–699	Approval likely; rate is 0.5%–1% above top tier
620–659	Borderline; may require higher equity or lower LTV
Below 620	Most mainstream lenders will decline; specialist lenders charge high rates

Effect on HELOC rate: HELOC rates are tied to prime (7.50% in May 2026) plus a margin. That margin is largely credit-score-driven:

760+ score: prime + 0.5%–1.0% = 8.0%–8.5%
700 score: prime + 1.0%–1.5% = 8.5%–9.0%
640 score: prime + 2.0%–3.0% = 9.5%–10.5%

On a $100,000 HELOC balance, a 1.5% rate difference is $125/month — or $15,000 over a 10-year draw period.

Requirement 3 — Debt-to-Income Ratio (DTI)

Lenders calculate DTI by dividing your total monthly debt payments by your gross monthly income.

What counts in DTI:

Existing mortgage payment
Car loans
Student loans
Minimum credit card payments
The proposed new home equity payment

Example:

Gross monthly income: $8,000
Mortgage: $1,800
Car loan: $450
Credit cards (minimum): $150
Proposed HELOC payment (fully amortized): $600
Total debt: $3,000
DTI: $3,000 ÷ $8,000 = 37.5% ✅ (below 43% maximum)

HELOC DTI calculation note: Lenders use the fully amortized repayment-period payment (principal + interest), not the interest-only draw payment — even if you’re only planning interest-only payments for 10 years. This is intentional; regulators require lenders to qualify borrowers at the higher payment.

Requirement 4 — Income and Employment Verification

Lenders will verify your income using:

W-2 employees: Last 2 years of W-2s, last 30 days of pay stubs
Self-employed: Last 2 years of tax returns (business and personal), often with a current P&L
Retired: Social Security award letter, pension statements, investment account statements showing distributions
Rental income: Lease agreements and 2 years of Schedule E from tax returns (typically only 75% of gross rent counts)

A gap in employment (more than 6 months) in the last 2 years requires a written explanation and may require 6–12 months of stability at a new employer before you can qualify.

Requirement 5 — Property Type

Lenders have different policies based on property type:

Property Type	Generally Accepted?	Notes
Primary residence (single-family)	✅ Yes — best rates	Standard product
Primary residence (condo)	✅ Usually	Must be warrantable condo
Second home / vacation home	✅ Yes — slightly higher rate	Usually requires 10%–20% equity remaining
Investment/rental property	⚠️ Harder	Many lenders decline; those that approve add 0.5%–1% to rate
Manufactured home	⚠️ Limited	Few lenders; often requires land ownership
Co-op	❌ Often declined	Very few lenders accept co-op equity products

How the Appraisal Works

Every home equity loan and HELOC requires an appraisal confirming your property value. The lender orders it; you pay for it ($400–$700).

If the appraisal comes in lower than expected: Your available equity shrinks. On a $400,000 home where you expected $90,000 in available equity, an appraisal at $375,000 drops your limit to:

85% × $375,000 = $318,750
Minus $270,000 mortgage balance = $48,750 (vs. $70,000 expected)

You can dispute an appraisal by providing comparable sales data to the lender, but this rarely changes the outcome significantly.

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy