# Home equity loan and HELOC requirements

> What you need for a home equity loan or HELOC: equity, credit, debt-to-income, documents and occupancy rules, plus the extra protections in Texas law.

URL: https://mortgage-math-us.com/home-equity/home-equity-requirements/  
Last reviewed: 2026-10-28 · By the MortgageMath US Editorial team

## Quick answer

To qualify for a home equity loan or HELOC you need enough equity that all loans on the home stay within the lender’s combined loan-to-value limit, a credit history and score the lender accepts, and income that covers the new payment at a debt-to-income ratio it allows. Lenders set most of these thresholds themselves, and a main home is easiest to borrow against. In Texas, the constitution caps borrowing at 80% of the home’s value, limits lender fees to 2% of the loan and bars closing until 12 days after you apply.

## Key facts

| Fact | Value | Source | As of |
|---|---|---|---|
| Fannie Mae DTI ceiling on first mortgages (for comparison) | 50% | [Fannie Mae Selling Guide B3-6-02](https://selling-guide.fanniemae.com/sel/b3-6-02/debt-income-ratios) | Apr 2, 2025 |
| Freddie Mac guidance for total debts | 45% | [Freddie Mac My Home](https://myhome.freddiemac.com/blog/homebuying/how-much-can-you-afford) | Jan 22, 2026 |
| Texas cap on home equity borrowing | 80% | [Texas Constitution, Art. XVI §50(a)(6)](https://capitol.texas.gov/tlodocs/85R/billtext/pdf/SJ00060E.pdf) | Nov 7, 2017 |
| Texas wait from application to closing | 12 days | [Texas Constitution, Art. XVI §50(a)(6)(M)(i)](https://capitol.texas.gov/tlodocs/85R/billtext/pdf/SJ00060E.pdf) | Nov 7, 2017 |
| Texas cap on lender fees | 2% | [Texas Constitution, Art. XVI §50(a)(6)(E)](https://capitol.texas.gov/tlodocs/85R/billtext/pdf/SJ00060E.pdf) | Nov 7, 2017 |
| Federal right to cancel on a main home | 3 business days | [CFPB](https://www.consumerfinance.gov/ask-cfpb/can-i-change-my-mind-after-i-sign-the-loan-closing-documents-for-my-second-mortgage-or-refinance-what-is-the-right-of-rescission-en-186/) | Aug 8, 2024 |

## What lenders check

There is no single federal rulebook that sets a minimum credit score or equity level for home equity borrowing. Each lender sets its own standards and prices the risk through your rate or margin. What they all look at is similar:

*Home equity requirements at a glance*

| Requirement | What the lender looks at | Who sets the bar |
|---|---|---|
| Equity | Combined loan-to-value (CLTV): all loans on the home, including the new one, ÷ appraised value | Each lender; Texas law caps homesteads at 80% |
| Credit | Score, payment history, recent late payments, existing credit lines | Each lender; stronger credit usually earns a lower rate or margin |
| Debt-to-income (DTI) | Monthly debt payments, including the new one, ÷ gross monthly income | Each lender |
| Income and job | Pay stubs, W-2s or tax returns, and employment checks | Verified by the lender; federal ability-to-repay rules cover home equity loans |
| Property | Value, condition, type and whether you live there | Each lender; main homes are the easiest |

Because lenders differ, being turned down by one doesn’t mean all will. Ask each lender for its maximum CLTV, any minimum score and how it calculates DTI for the product you want.

## Equity

The equity test is a CLTV limit, not a minimum percentage of equity. Multiply the home’s value by the limit and subtract what you owe; whatever is left is the most you can borrow. A lender with an 80% limit lends nothing if your mortgage already equals 80% of the value. [How much equity can you borrow?](https://mortgage-math-us.com/home-equity/how-much-equity/) has the table for common limits.

## Credit and debt-to-income

Your DTI is all monthly debt payments — mortgage (with taxes and insurance), car, student and card minimums, plus the new home equity payment — divided by gross monthly income. Lenders set their own ceilings. For context, Fannie Mae’s automated system accepts DTIs up to 50% on first mortgages it buys, and Freddie Mac’s consumer guidance suggests keeping total debts below 45% of income.

> **Worked example: DTI check: $96,000 income ($8,000 a month), $2,500 of existing monthly debts, borrowing $40,000**
>
> | Scenario | Monthly debts | DTI |
> |---|---:|---:|
> | Today (mortgage $1,900, car $450, cards $150) | $2,500 | 31.3% |
> | Plus a 15-year home equity loan at an example 8.25% | $2,888 | 36.1% |
> | Plus a HELOC, interest only at 8% | $2,767 | 34.6% |
> | Plus the same HELOC, repayment payment | $2,835 | 35.4% |
> 
> The HELOC rate is prime (7%) plus an example 1-point margin. Lenders may qualify you on a HELOC’s higher repayment payment rather than the interest-only minimum.

Recent late payments, especially on your current mortgage, weigh heavily against you. Check your credit reports before applying and pay down card balances if you are near a lender’s cutoff.

## Documents to have ready

**Gathering your paperwork**

1. **Identity** — Government photo ID and Social Security number for every borrower.
2. **Income** — Recent pay stubs and W-2s; if you are self-employed, tax returns and business records. Add statements for pensions, Social Security or other income you want counted.
3. **The home** — Latest mortgage statement for every loan on the property, homeowners insurance declarations page, property tax bill and any HOA details.
4. **Debts and assets** — Statements for other loans and accounts the lender asks about.
5. **Purpose** — For a renovation, contractor bids help the lender and your own records if you plan to [deduct the interest](https://mortgage-math-us.com/home-equity/home-equity-interest-deduction/).

## Main home, second home or rental

**Principal residence.** The widest choice of lenders and the most protection: federal law gives you 3 business days after closing to cancel, and in Texas the homestead rules below apply.

**Second home.** Some lenders will lend against one, often with tighter limits. The federal right to cancel does not apply.

**Investment property.** Fewer lenders offer home equity loans or HELOCs on rentals, and those that do often set lower CLTV limits and higher rates. A loan used for a rental you don’t live in may be treated as business credit, which can fall outside some federal consumer-lending protections. Read the terms closely.

## Texas home equity rules

Texas writes its home equity rules into the state constitution (Article XVI, Section 50). They apply to home equity loans, HELOCs and cash-out refinances secured by a homestead:

*Texas constitutional requirements for home equity borrowing*

| Rule | Requirement |
|---|---|
| Borrowing cap | All loans on the homestead together up to 80% of fair market value |
| Waiting period | No closing until 12 days after you apply |
| Fees | Lender fees up to 2% of the original principal; some costs, such as the appraisal and survey, are excluded |
| How often | Generally no new home equity loan within 12 months of the previous one |
| Cancel after closing | 3 days to rescind without penalty |
| HELOC draws | Each advance at least $4,000; no draws by credit or debit card |
| Where you close | At the lender’s office, an attorney’s office or a title company |
| Personal liability | None — the loan is without recourse against you personally, except for actual fraud |
| Foreclosure | Only with a court order |

These rules protect borrowers but also mean Texas closings take longer to arrange. See the [Texas guide](https://mortgage-math-us.com/location/texas/) for taxes, insurance and closing costs in the state.

> **Tip: Before you apply anywhere**
>
> Pull your credit reports, list every monthly debt, and estimate your CLTV with a realistic value. Then compare at least two lenders’ limits, rates and fees — a [HELOC](https://mortgage-math-us.com/home-equity/heloc/) and a [home equity loan](https://mortgage-math-us.com/home-equity/home-equity-loan/) can qualify differently.

## Frequently asked questions

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

There is no federal minimum. Each lender sets its own score requirement, and higher scores usually get lower rates or margins. Ask lenders for their minimum before you apply.

### How much equity do I need for a HELOC?

Enough that your current mortgage plus the new line stays within the lender’s combined loan-to-value limit. In Texas, the legal maximum on a homestead is 80% of the home’s value.

### What debt-to-income ratio do I need?

Lenders set their own limits. As a reference point, Fannie Mae’s automated system accepts up to 50% on first mortgages, and Freddie Mac suggests keeping total debts below 45% of gross income. In our example, a $40,000 home equity loan raised the DTI from 31.3% to 36.1%.

### Can I get a HELOC on a rental property?

Some lenders offer them, usually with lower borrowing limits and higher rates than on a main home. Federal rescission rights don’t apply, and a loan for a rental may be treated as business credit.

### How long does a Texas home equity loan take?

At least 12 days from application to closing under the Texas Constitution, and the loan can close only at the lender’s office, an attorney’s office or a title company.

### Do I need an appraisal?

The lender needs a value for the home. Depending on its policies and the loan size, that may be a full appraisal, a limited or desktop appraisal, or an automated valuation.

## Sources

- [Freddie Mac Primary Mortgage Market Survey](https://www.freddiemac.com/pmms) — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- [Federal Reserve H.15](https://www.federalreserve.gov/releases/h15/) — Bank prime loan rate (Oct 29, 2026)
- [CFPB](https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-line-of-credit-heloc-en-107/) — HELOC repayment period, often up to (CFPB) (Aug 28, 2026)
- [Texas Constitution, Art. XVI §50(a)(6)](https://capitol.texas.gov/tlodocs/85R/billtext/pdf/SJ00060E.pdf) — Maximum combined loan-to-value for Texas home equity loans; Texas home equity fee cap (share of original principal); Minimum wait after application before a Texas home equity loan can close (Nov 7, 2017)
- [Fannie Mae Selling Guide B3-6-02](https://selling-guide.fanniemae.com/sel/b3-6-02/debt-income-ratios) — Fannie Mae maximum DTI, Desktop Underwriter loans (Apr 2, 2025)
- [Freddie Mac My Home](https://myhome.freddiemac.com/blog/homebuying/how-much-can-you-afford) — Freddie Mac guidance: total debt payments below this share of gross income (Jan 22, 2026)
- [CFPB](https://www.consumerfinance.gov/ask-cfpb/can-i-change-my-mind-after-i-sign-the-loan-closing-documents-for-my-second-mortgage-or-refinance-what-is-the-right-of-rescission-en-186/) — Right to cancel a refinance or home equity loan on your principal home (Aug 8, 2024)
- [CFPB: What is a home equity loan?](https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-loan-en-106/)
- [Texas SJR 60 (2017): Art. XVI, Sec. 50 home equity provisions](https://capitol.texas.gov/tlodocs/85R/billtext/pdf/SJ00060E.pdf)
- [FTC: Home equity loans and home equity lines of credit](https://consumer.ftc.gov/articles/home-equity-loans-and-home-equity-lines-credit)

_General information, not financial advice._