How to Apply for a Home Equity Loan
Updated: January 27 2026 • 6 min read
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<p><span>Bennett Leckrone is the editorial manager and an analyst for Lower. He specializes in making complicated mortgage topics accessible for consumers. That includes both in-depth product guides and in-depth analysis on what economic moves mean for homebuyers and refinancers.</span></p>
<p><span>He was previously a business reporter with a focus on higher education and fintech at BestColleges. In that role, he reported on the development of fintech and AI curriculum, as well as the rapidly changing nature of finance education. He also wrote guides to help business students navigate AI and online education.</span></p>
<p><span>He also reported on state politics at Maryland Matters, with a focus on how policy affected people and businesses. He holds a bachelor of science in journalism degree from Ohio University.</span></p>
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REVIEWER: (SizeLimitingPyMap: {bio=<p><span>Neel Patel is a mortgage industry professional with more than a decade of hands-on experience across loan origination, customer experience, sales operations, and strategy. He has worked at every stage of the mortgage lifecycle, from advising individual borrowers to leading teams of loan officers. </span></p>
<p><span>As an expert reviewer, Neel evaluates mortgage and personal finance content for accuracy, clarity, and real-world applicability. He specializes in ensuring information reflects how lending actually works in practice so consumers can make confident, informed decisions.</span></p>, hs_child_table_id=0, hs_created_at=1770998587713, hs_created_by_user_id=85123122, hs_deleted_at=0, hs_id=207521716567, hs_initial_published_at=1770998795717, hs_is_edited=false, hs_name=Neel Patel, hs_path=neel-patel, hs_published_at=1770998795717, hs_updated_at=1770998733653, hs_updated_by_user_id=85123122, name_first_last=Neel Patel, profile_picture={url=https://19577492.fs1.hubspotusercontent-na1.net/hubfs/19577492/Neel%20Patel%20Cropped%204.jpg, width=1638, height=2048, altText=Neel Patel, fileId=207528140173, type=image}, tags=[{id=2, name=reviewer, label=Reviewer, isHubspotDefined=false, labelTranslations={}, type=option, createdAt=1770043811028, createdByUserId=83124684, createdBy={id=83124684, email=shilyard@lower.com, firstName=Shawn, lastName=Hilyard}, updatedAt=1770043811028, updatedByUserId=83124684, updatedBy={id=83124684, email=shilyard@lower.com, firstName=Shawn, lastName=Hilyard}, order=1}]})
Written by
Bennett Leckrone
Writer / Reviewer / Expert
Reviewed by
Neel Patel
Reviewer
Key Takeaways
- The initial application for a home equity loan is often fast and seamless, but the actual process of getting the loan takes time.
- You'll need documents to show your identity, income, and equity.
- It’s generally best practice to get quotes from multiple lenders to compare offers.
Apply in less than five minutes.
A home equity loan can turn a portion of your home’s value into a lump sum of cash with a fixed interest rate and predictable monthly payments, and often comes with a lower rate than personal loans or credit cards.
Initial online applications are usually quick and just require some basic information, but the actual process of getting a home equity loan is more in-depth. You’ll need to assess your eligibility, gather documents, compare lender offers, complete an appraisal, and finalize at closing.
How Home Equity Loans Work
A home equity loan is a second mortgage that lets you borrow a lump sum against your home equity, or the difference between your home’s current market value and what you owe on your mortgage. They are typically at a fixed interest rate with set monthly payments, according to the Consumer Financial Protection Bureau’s guide to using home equity.
They aren’t without risk: Because your home secures the loan, failure to repay can lead to loss of home, so treat the commitment with the same care as your primary mortgage.
A home equity loan is different from a HELOC, or home equity line of credit, in that it’s a single lump sum rather than a revolving credit line. Home equity loans are best for predictable payments and large, one-time expenses, whereas HELOCs offer more flexibility for phased expenses.
You can use our home equity calculator to get an idea of how much home equity you've got, and how much you might have in the future:
Home Equity Calculator
Estimate your equity today and model how it could change over time based on mortgage payoff and optional home appreciation.
Your Results
| Year | Home value | Mortgage | Equity | LTV |
|---|
| Month | Payment | Principal | Interest | Balance |
|---|
This tool estimates equity today and projects equity over time using two building blocks: home value and mortgage balance.
1) Equity
Equity = Home value − Mortgage balance
2) Home value over time (optional appreciation)
If “Include annual home appreciation” is checked, the calculator compounds home value each year:
Future home value = Today’s value × (1 + a)y
where a is the annual appreciation rate (as a decimal) and y is years in the future. If appreciation is unchecked, the tool uses a = 0.
3) Mortgage balance over time (amortization)
The mortgage projection assumes a standard fixed-rate loan on your current remaining balance with years remaining.
Monthly payment = P × r × (1 + r)n / ((1 + r)n − 1)
where P is today’s mortgage balance, r is the monthly interest rate (APR/12), and n is the number of remaining payments (years remaining × 12).
Each month, interest is calculated on the remaining balance and the rest of the payment reduces principal:
Interest = Balance × r
Principal = Payment − Interest
New balance = Balance − Principal
4) What the “Key years” table shows
For Year 0, a midpoint year, and the final year, the calculator: (a) estimates home value, (b) estimates remaining mortgage balance after y years, then (c) computes equity and loan-to-value (LTV).
LTV = Mortgage balance / Home value
Put your equity to work.
How to Check your Eligibility for a Home Equity Loan
Your credit score, income, and current home equity all affect your eligibility for a home equity loan. Here’s an overview of how to check your eligibility for a home equity loan:
- Home equity and CLTV: Many lenders cap total borrowing at 80% to 85% combined loan-to-value (CLTV). CLTV includes your current mortgage plus the new loan, divided by your home’s value. Practically, that means you often need around 20% equity to qualify.
- Debt-to-income ratio (DTI): Your DTI is the share of gross monthly income that goes to debt payments. Lenders commonly prefer DTI under 36%, though some approve up to 43%.
- Credit score: A minimum score of 620 is common, and stronger credit may earn lower rates and higher loan amounts. Lenders also verify employment and stable income, and will order a home appraisal. You can pull your free credit reports at AnnualCreditReport.com and dispute any errors before you apply.
Here’s a quick eligibility checklist, but keep in mind that requirements vary by lender and based on your unique financial situation.
- At least 20% home equity and within an 80%–85% CLTV limit
- DTI ideally below 36% (up to 43% may be allowed)
- Credit score of at least 620, although getting a home equity loan with bad credit is possible
- Property in good condition with sufficient market value
Documents You Need to Apply for a Home Equity Loan
Lenders verify your ability to repay and the property securing the loan. You should organize both digital and paper copies to speed up the process.
Here are some commonly required documents, although additional might be required:
- Recent pay stubs and W-2s (or two years of tax returns if self-employed)
- Bank statements (typically 1–2 months)
- Current mortgage statement and property tax bill
- Proof of homeowners insurance
- Government ID and Social Security number
- Signed authorization for credit and income verification
You should also budget for closing costs, which often come to about 2% to 6% of the loan amount. Closing costs cover appraisal, title, and origination fees.
The Bottom Line
There are three main pillars that determine your eligibility for a home equity loan: Your home equity, your credit score, and your ability to repay.
Lenders usually require you to have built up equity in your home and a fair debt-to-income ratio to qualify for a home equity loan, but exact requirements vary by lender.
Frequently asked questions about qualifying for a home equity loan
What credit score is needed to qualify for a home equity loan?
Most home equity loan lenders require a minimum credit score of 620–680, and higher scores can help you qualify for better rates and higher borrowing limits.
How much home equity do I need for a home equity loan?
You generally need at least 15–20% equity, with most lenders capping total LTV/CLTV around 80–85% and some stretching to 90% with stricter requirements.
What documents are required to apply for a home equity loan?
Expect recent pay stubs, W-2s or tax returns, bank statements, your current mortgage statement, and proof of homeowners insurance.
Does applying for a home equity loan require an appraisal?
Many lenders require an appraisal to verify value, though some may use automated valuation models depending on the loan and policy.
Can I qualify for a home equity loan if I am self-employed?
Yes. Plan to provide two years of tax returns, year-to-date financials, and other proof of consistent income.
What is a debt-to-income ratio, and why does it matter?
DTI compares your monthly debt payments to gross monthly income; most lenders want 43% or less for approval.
Are closing costs required for a home equity loan?
Yes. Budget for closing costs typically ranging from 2% to 6% of the loan amount.