Home Equity Loan Requirements for 2025

Is it hard to qualify for a home equity loan?

Qualifying for a home equity loan is often easier than you might think. The key home equity loan requirement is having a sufficient amount of equity built up—which, for most U.S. homeowners, is a given.

You’ll still need a good credit score and a steady income, but many borrowers find they meet the guidelines without much trouble.

As we explore how to get a home equity loan and uncover what disqualifies you from getting a home equity loan, you’ll see that the process isn’t as tough as it appears.

In this article (Skip to...)

• Typical requirements
• Who could be denied?
• Check your eligibility
• FAQ

Home equity loan requirements in 2025

Below are typical home equity loan requirements that you’re likely to see from many banks and lenders in 2025. Some might be more lenient than others, but note that if your loan is borderline or considered a higher risk, you could pay higher interest rates and closing costs as a result.

1. Minimum 20% equity

Meeting home equity loan requirements starts with having enough equity in your home. Typically, lenders want you to hold at least 20% equity. This means you can typically borrow up to 80% of your home’s value between your primary mortgage and second mortgage combined. In other words, to qualify for a home equity loan, you’ll need more than 20% equity in your home.

Here’s an example:

• Your home is worth $400,000
• Your existing mortgage balance is $200,000
• Your maximum combined loan amount is $320,000 (80% of $400,000)
• Your maximum home equity loan amount is $120,000 ($320,000 minus the existing loan balance)

Remember that your total equity is the difference between your home value and your primary loan amount. Even though you technically have $200,000 in home equity in this scenario, you can’t borrow the full sum because you must leave that 20% equity cushion untouched. Thus, your maximum home equity loan amount is closer to $120,000.

You may be able to find lenders who will let you borrow more than 80% of your equity. But they’re relatively rare—more so than for home equity lines of credit (HELOCs). Also note that VA loan borrowers can often borrow up to 100% of their equity.

2. A credit score of 620 or more

A good credit score is an important home equity loan requirement. While many lenders accept scores starting at 620, aiming for a score of 740 or higher can unlock lower interest rates and more favorable loan terms.

In practical terms, if your credit score is around 620, you might qualify—but a score north of 700 can save you money over the life of your loan by reducing the interest you’ll pay.

3. Stable and consistent income

While there isn’t a fixed income figure required, lenders need assurance that you have a stable and sufficient monthly income to comfortably manage additional loan payments.

Lenders may request you to provide pay stubs, W-2 forms, or other income documentation. Demonstrating a consistent income stream reassures lenders that you’ll be capable of keeping up with your new financial obligations, ultimately making your application stronger and more attractive.

4. DTI ratio of 43% or less

Keeping your debt-to-income ratio in check is essential when meeting home equity loan requirements. Lenders typically prefer a DTI ratio of 43% or less, meaning your monthly debt obligations, including your current mortgage and any other installment loans, should not exceed 43% of your gross monthly income.

A lower DTI not only improves your chances of approval but also contributes to better overall loan terms and interest rates.

What disqualifies you from getting a home equity loan?

Lenders deny home equity loan applications when borrowers don’t meet key home equity loan requirements. The most common reasons for disqualification include:

• Not enough equity: Most lenders require at least 20% equity in your home to qualify. If your loan-to-value ratio (LTV) or combined loan-to-value (CLTV) is too high, you may need to build more equity before applying.
• Low credit score: A credit score below 620 can make approval difficult. Some lenders may approve lower scores, but they often come with higher interest rates and stricter repayment terms.
• High debt-to-income ratio: If your DTI ratio, including the new loan repayment, exceeds 43%, lenders may view you as a risk and decline your application.

Even if you’re denied, you may still qualify with another lender—some have more flexible loan options than others. Improving your credit score, paying down high-interest debt, or increasing the value of your home can improve your chances of approval.

FAQs about home equity loan requirements

Find out if you meet home equity loan requirements

If you meet basic thresholds for available equity, credit score, and DTI, there’s a very good chance you can get approved for a home equity loan. But you won’t know for sure until you apply with a lender.

Keep in mind that the mortgage marketplace is competitive. You can often find a lower interest rate and/or easier approval standards by shopping around. So don’t be shy about getting quotes from multiple home equity loan lenders and comparing their offers.