What credit score and debt-to-income ratio do I need for a HELOC?
The short answer
Requirements vary by program, but many HELOCs look for a credit score in the mid-600s or higher, a debt-to-income ratio under roughly 45% to 50%, and total mortgage debt at or below about 80% of your home's value. Better credit gets better pricing. The Mortgage Advisory will tell you honestly where you stand, and which program fits, before anyone does a hard credit pull.
What do HELOC lenders look at?
- Equity: your first mortgage plus the HELOC usually needs to stay at or below about 80% of your home's value, sometimes a bit higher with strong credit.
- Credit score: many programs start in the mid-600s, with the best pricing at higher scores.
- Debt-to-income (DTI): your monthly debts, including the new HELOC payment, divided by your gross monthly income. Many programs cap it around 45% to 50%.
- Income you can document: pay stubs and W-2s, or tax returns if you're self-employed.
- Property: primary homes get the best terms; second homes and rentals are available in some programs.
How do I figure my debt-to-income?
Add up your monthly payments (mortgage with taxes and insurance, car, student loans, minimum card payments, plus the new HELOC payment) and divide by your gross monthly income.
Example: $4,100 in payments ÷ $9,500 in income = 43%.
If you're using the HELOC to pay off cards, the payments you're getting rid of can come off the total, which can help you qualify.
What if my credit or DTI is borderline?
- Pay down a card to lower your balances before applying.
- Borrow a little less to lower the payment.
- Use the HELOC to pay off debts so those payments drop out of your DTI.
- Check for errors on your credit report.
Example scenario (illustrative)
A teacher in Colorado Springs has a 668 credit score and a 47% DTI including a planned HELOC payment. By using the HELOC to pay off two credit cards at closing, her DTI drops to 39%, and she qualifies for the line she needs.
Our take
Don't guess, and don't let three lenders pull your credit. I'll walk through your numbers first and tell you what you'd qualify for, and how to improve it if you're close.
Ace Ausar, Mortgage Banker · NMLS #1143018
The Mortgage Advisory, Inc. · NMLS #1549739
Reviewed by Ace Ausar, NMLS #1143018 · Updated
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