How hard is it to get a HELOC in 2025? Key requirements — and what to do if you’re denied

With Americans collectively sitting on over $11 trillion in tappable home equity, it’s not surprising that many are turning to home equity lines of credit (HELOCs) to access these funds. Indeed, homeowners have opened more than 13 million HELOCs to date, carrying an average balance of around $45,000.

HELOCs function like credit cards secured by your home, letting you borrow as needed during a 10-year “draw period” before entering a 15- or 20-year repayment phase. Unlike a home equity loan, you only pay interest on what you actually use, and you can repeatedly draw and repay during the draw period.

But it is harder to get a HELOC in 2025? “Lenders haven’t made getting a HELOC harder, but the current interest rate environment and higher Fed funds rate have a direct impact on the prime rate, which determines costs associated with HELOC loans,” says Phil Crescenzo Jr., vice president at Nation One Mortgage Corporation. “The good news is that when there is a Fed funds cut, HELOC borrowers see immediate relief. But since the overall market has not moved very much, it’s been a delayed waiting game.”

With that in mind, let’s walk through how to actually qualify for HELOC, what might result in a denial and strategies to improve your chances of approval.

Key requirements to qualify for a HELOC or home equity loan

Even if you’ve owned your home for a long time, getting approved for a HELOC isn’t automatic. Qualifying in 2025 typically requires that you have a steady income, good to excellent credit and at least 15% to 20% equity in your home.

Understanding these key requirements will help you assess whether you’re likely to be approved. Here’s what lenders are looking for in 2025.

Credit score requirements

Your credit score significantly impacts your approval odds and the interest rate you’ll receive. While some lenders will accept credit scores as low as 620, it’s more common to see lenders require scores of 680 and up — with the most competitive HELOC rates typically going to borrowers with 740 scores or higher.

As Crescenzo emphasizes, “Credit scores play a major role in HELOC approval. Since the loans are almost always in second position, aka the ‘second lien’ on your home, the qualifying criteria is always more rigid than what a first mortgage loan would be.”

Equity requirements

To qualify for a HELOC, you’ll typically need at least 15% to 20% worth of equity in your home, with most lenders allowing you to borrow up to 85% of your home’s value through a combined loan-to-value ratio (CLTV) that includes both your primary mortgage balance (if you have one) and your HELOC amount.

Let’s say your home’s appraised value is $400,000 and you still owe $250,000 on your mortgage. Here’s how the math might shake out.

The actual amount you may qualify for depends on other factors beyond your home’s available equity, including your credit and income history and the lender’s specific requirements.

Income and employment verification

While there typically isn’t a specific minimum income requirement for HELOCs, lenders need to verify that you have stable, reliable income to repay the loan. For retirees, this can include Social Security benefits, pension income, retirement account distributions, investment income and any contracting or freelance pay stubs.

As Melissa Cohn, regional vice president at William Raveis Mortgage says, it’s important to do your homework before applying. “Reach out to lenders and ask what the guidelines are for getting approved before you apply,” says Cohn. “If you don’t meet one of the guidelines, then you can work to correct the issue. If you’re self-employed, check to see that your adjusted gross income is sufficient to qualify — if not, some lenders are letting HELOC borrowers use a bank statement program to qualify.”

DTI limits

Debt-to-income ratio (DTI) is another factor that lenders evaluate. This ratio measures your gross monthly income relative to your monthly debt payments, including your mortgage and future HELOC payments. As a general rule, lenders prefer your DTI to be 43% or lower, though some lenders will accept a DTI of up to 50% if your overall financials are strong.

To calculate your DTI, add up all your monthly debt payments including your mortgage, car loans, student loans, credit card minimum payments and other debt obligations. Then divide this total by your gross monthly income (that’s before taxes) and multiply by 100 to get a percentage.

For example, if your gross monthly income is $7,500 and your monthly debts include a $1,500 mortgage payment, a $450 car loan and $300 in credit card minimum payment, your DTI ratio would be 30% — which is below the 43% threshold that most lenders look for:

Even with a lower DTI, you’ll want to make sure that any new payments comfortably fit into your budget, especially in times of rising interest rates.

Property and appraisal details

The value of your home is fundamental to determining how much you can borrow. Most HELOC lenders require an appraisal to determine the current market value of your home and your available equity. While some lenders may offer digital or automated valuation models (AVMs), many will still send an appraiser to your home.

The appraisal process will evaluate:

• Your home’s current market value

• The property’s condition

• Comparable recent sales in your neighborhood

• Any home renovations or improvements you’ve made

💡Expert tip: Keep in mind that property type can also affect approval. As Cohn notes, “If it is a condo, the building may get rejected for poor financials, assessments or deferred maintenance.”

Dig deeper: The truth about no-appraisal home equity loans: What borrowers need to know

How the home equity application process works

The HELOC or home equity loan application process follows four general steps, from initial application to funding. Here’s what you can expect.

1. Application and documentation

The first step is completing an application with your chosen lender.

Lenders will typically request the following types of documents:

• Government-issued ID, such as a driver’s license or passport

• W-2s or 1099s, including 1099-Rs for retirement distributions

• Bank statements showing regular deposits

• Mortgage statements for your mortgage, if you have one

• Proof of homeowners insurance

• Property tax statements

You can apply for a HELOC online, over the phone or in person with a loan officer. Many lenders offer streamlined online applications that take just minutes to complete and faster approvals. Keep in mind, however, that the tradeoff for convenience and speed may come in the form of higher interest rates.

💡 Expert tip: To help you get the lowest rate for your needs, always comparison shop at least three to four lenders, including local banks and credit unions, which often have competitive rates for members and special introductory rates.

2. Appraisal process

After submitting your application, the lender typically orders an appraisal to determine your home’s current market value. If an in-personal appraisal is required by the lender, the appraiser will contact you to schedule a convenient time for the property assessment.

The good news is that many lenders will waive the appraisal fee as long as you meet certain conditions — for example, keeping your HELOC open for at least three years.

3. Approval timeline and process

Getting a HELOC usually takes between two and six weeks. The timeline largely depends on the lender’s efficiency, your responsiveness to queries, how big a line of credit you want and how easy your home is to appraise. Traditional banks tend to take longer than nonbank lenders, which often use technology to speed up the loan process.

During this time, in addition to the home appraisal, your finances and creditworthiness will undergo a review by an underwriter. If anything looks off, you’ll likely be asked to provide additional documentation and clarification.

4. Payout and accessing funds

Once approved, you’ll sign closing documents, often in front of a notary. After approval, you can access your HELOC in a number of ways: by check, electronic transfers, in-branch withdrawals or all of the above.

Some lenders impose a minimum initial draw requirement, but you can typically put the funds back into your HELOC if you don’t need to use them right away to avoid paying interest — however, check with your specific lender to verify.

Common reasons you could be denied for a HELOC or home equity loan

Despite meeting basic requirements, some applicants will still get a denial. Understanding these common reasons for rejection can help you address potential issues before applying.

💼 Income issues

• You can’t demonstrate a solid two-year job history

• Inconsistent, seasonal or commission-based earnings

• Self-employment without sufficient documentation

💳 Credit concerns

• Score below lender minimum — typically 620 to 680 or higher

• Recent late payments or high credit utilization

• Bankruptcies or foreclosures in credit history

⚖️ Debt overload

• DTI exceeds 43% threshold

• High credit card debt balances

• Multiple property mortgages

🏠 Property problems

• Disappointing appraisal results

• Maintenance or condition issues

• Nonstandard property type, such as a condo or manufactured home

HELOCs vs. home equity loans

While similar in some ways — both loan options allow you to borrow against the equity in your homes — a HELOC functions like a credit card with a revolving line of credit, while a home equity loan functions more like a second mortgage.

Dig deeper: Home equity loan vs. HELOC: Which is best for borrowing against your equity?

How to improve your chances of approval

If you’re concerned about meeting all the requirements for a HELOC or home equity loan, here are strategies to strengthen your application:

Improve your credit score

Before applying for a home equity product, take steps to maintain or improve your credit score:

• Check your credit report for errors and dispute inaccuracies

• Pay down credit card balances to reduce utilization

• Avoid opening new credit accounts before applying

• Keep old accounts open to maintain your credit history

• Make all payments on time, especially your mortgage

Even a modest improvement in your credit score can increase your approval odds and potentially secure a better interest rate.

Lower your DTI

Reducing your debt-to-income ratio can significantly improve your chances of approval. Lowering your DTI ratio can help improve your odds of qualifying for a home equity loan or HELOC. Paying down existing debt could also boost your credit score, further strengthening your application.

Build your home equity more quickly

Increasing your home equity can improve your chances of approval and potentially allow you to borrow more.

Strategies to build equity faster include:

• Making extra principal payments on your mortgage

• Choosing a biweekly payment schedule to make an extra payment each year

• Completing value-adding home improvement projects

• Waiting for market appreciation in rising housing markets

• Refinancing to a shorter-term mortgage (if interest rates are favorable)

Remember that building equity takes time, so this strategy works best if you’re not in an immediate rush to secure financing.

💡 HELOC insider tip: When facing income verification hurdles, try credit unions rather than traditional banks. Many credit unions offer more flexible underwriting for members, including alternative income verification methods like bank statement analysis rather than strict two-year employment history requirements. Some lenders also specialize in working with self-employed borrowers and those with multiple income sources.

Dig deeper: 5 ways to build equity in your home more quickly (and why it matters)

Alternatives to a HELOC

If you’re unable to qualify for a HELOC, or if you’re looking for an alternative, consider these three key financing options.

Personal loans

Personal loans are unsecured loans that don’t require home equity as collateral. While they typically have higher interest rates than home-secured options, they offer several advantages:

• Little to no risk to your home if you can’t make payments

• Typically faster approval and funding processes

• Fixed interest rates and predictable payments

• No closing costs or appraisal fees (although origination fees can apply)

• Available to those with limited or no home equity

Personal loans tend to work well for smaller projects or emergency financing when you prefer not to use your home as collateral.

Dig deeper: Home equity loan vs. home improvement loan: Which is best for financing your next update?

0% intro APR credit cards

Many lenders offer specialized credit cards that can act like a no-interest short-term loan if you can pay off what you borrow within the introductory period, offering:

• 0% APR introductory periods of 12 to 21 months

• Reward points or cash back on purchases

• No annual fees on many cards

• Instant access to funds with no application delays

• Revolving credit line that replenishes as you pay down the balance

These cards work best for smaller projects you can pay off during the promotional period, helping you avoid the high interest rates that kick in afterward.

Dig deeper: What is a 0% intro APR card? Pros, cons and types to consider before you apply

Cash-out refinance

A cash-out refinance replaces your current mortgage with a new, larger one, providing access to your home’s equity while typically requiring you to maintain at least 20% equity after closing. But it can be an expensive option, as you’ll pay closing costs ranging from 2% to 6% of the loan amount.

A cash-out refinance might be appropriate if:

• You can secure a lower interest rate than your current mortgage

• You plan to stay in the home long enough to recoup the closing costs

• You want to extend your loan term to lower monthly payments

• You prefer having a single mortgage payment

• You need a large sum of money for a major expense

Dig deeper: Cash-out refinance vs. home equity loans: Which is best for borrowing in today’s market?

More stories in our home loans and money series

• Should you use a home equity loan to remodel or renovate your home?

• What is a reverse mortgage? How it works, who it’s best for — and who should steer clear

• Fact vs. fiction: Top 7 home equity myths — debunked

• 8 common money mindsets that are holding you back — and how to break through the barriers

• Should you pay off your mortgage early? 5 top factors to consider first

FAQs: Applying and getting approval for a HELOC

Learn more about HELOCs with these commonly asked questions. And take a look at our growing library of personal finance guides that can help you earn money, save money and grow your wealth.

Will applying for a HELOC hurt my credit score?

Yes, initially. When you apply, the lender will perform a hard credit inquiry, which typically causes a small, temporary drop in your credit score. However, if you’re approved, managing a HELOC responsibly can ultimately boost your credit.

Can I get a HELOC if I’m retired?

Yes, lenders can’t turn you down for a HELOC simply because you’re retired. But you’ll need to demonstrate sufficient, stable income from sources like Social Security, pensions or investment income.

Do I need an appraisal for a HELOC or home equity loan?

While many HELOCs and home equity loans require an appraisal to determine your home’s current value, if you’ve recently bought your home and have excellent credit, you might be able to find a lender that offers no-appraisal home equity loans. These loans use digital tools and hybrid models that assess your home’s features and recently sold homes in your neighborhood, among other factors, to determine your home’s value. Start with specialty digital lenders and marketplaces like Lending Tree or Rocket Mortgage. And learn how they work and what to expect in our guide to no-appraisal home loans.

Can I get a HELOC with bad credit?

It’s challenging to be approved for a HELOC if you don’t have good credit. If your FICO score is in the low- to mid-600 range, you might need to be a strong borrower in other respects to qualify for a HELOC. Consider improving your credit before applying or using a cosigner (with caution).

Can I deduct HELOC interest from my taxes?

It’s possible — interest paid on a HELOC is tax-deductible as long as it’s used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS, up to certain limits. Talk with a trusted tax professional or financial advisor to confirm whether that applies to your HELOC and tax return.

Sources

• Record Levels of Tappable Equity, Fed Rate Cuts Could Spur Resurgence in Home Equity Withdrawals, ICE Mortgage Monitor. Accessed May 13, 2025.

• HELOC Balances Surpass $45,000 in 2024, Experian. Accessed May 13, 2025.

About the writer

Kat Aoki is a seasoned finance writer who’s written thousands of articles to empower people to better understand technology, fintech, banking, lending and investments. Her expertise has been featured on sites like Lifewire and Finder, with bylines at top technology brands in the U.S. and Australia. Kat strives to help consumers and business owners make informed decisions and choose the right financial products for their needs.

Article edited by Kelly Suzan Waggoner

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