Key Takeaways
- The HELOC process works like a mortgage, with quotes, paperwork, an appraisal, and closing.
- Most HELOCs take about 2–6 weeks from application to funding.
- Most HELOC lenders require decent equity and a manageable debt-to-income ratio.
- Getting your credit in shape first can help you qualify and lower your HELOC rate.
The HELOC process is similar to the mortgage process: You’ll receive rate quotes, select a lender, submit financial documents, and wait for an appraisal. Once you’re approved, you’ll close the loan and access your funds. Many HELOC lenders offer streamlined online applications to help speed up the process.
With home equity near record highs and mortgage rates climbing, a home equity line of credit can be a smart way to tap into your home’s value without refinancing. If a HELOC seems right for you, here’s how to get started.
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How to get a HELOC in six steps
There are six basic steps required to get a HELOC:
- Get your credit in shape first, if you have time
- Compare HELOC rate quotes
- Complete your application and provide financial documents
- Wait for approval, including underwriting and appraisal
- Close on the loan and pay any upfront fees
- Receive access to your line of credit
Let’s dig into each of those steps in a bit more detail.
1. Get your credit in shape
If you’re not in a rush to apply immediately, take some time to check in on your credit first. A little effort now could make it easier to meet HELOC requirements and earn you a much lower interest rate. And that could save you serious money.
Check your credit reports
Start by obtaining free copies of each of your credit reports from annualcreditreport.com. Review each report thoroughly. Errors are more common than you might think. If you find one that damages your credit score, begin the process of correcting it. It may take some time, but showing lenders that you’ve started fixing the error can help your chances of qualifying.
Reduce credit card debt
If possible, pay down your credit card balances and keep them low before applying for a HELOC. This can lower your debt-to-income ratio and improve your credit score — making it easier to qualify for a low rate.
Many experts recommend keeping your credit balances below 30% of your total limit, although FICO suggests that a credit utilization ratio of around 10% is ideal. As a rule of thumb, the lower your credit usage is, the better.
2. Compare HELOC rate quotes
Assuming your finances are in order, the first step to getting a HELOC is to compare rate quotes from multiple lenders. This is essential because different lenders can offer quite varied rates and closing costs on HELOCs. The more quotes you gather, the better deal you’re likely to find.
There’s usually some trade-off between HELOC rates and fees. Some lenders offer low or zero closing costs, but these almost always charge higher interest rates. Other lenders focus on low rates but charge higher upfront costs. You need to pick the overall deal that suits your needs best.
The more information you provide to a lender when requesting a quote, the more accurate it will be. However, the amount of information lenders ask for at this early stage can vary widely. Sometimes, it may only take a few minutes to get a HELOC estimate online.
3. Complete your application
Once you’ve chosen a lender, you’ll complete a full HELOC application. Applying online can be quite quick, with some lenders suggesting a 15-minute process. But remember that the underwriting process will involve full documentation of your finances and a new home appraisal, so don’t expect instant approval.
Applying for a HELOC requires most of the same documentation you supplied when you got your original mortgage. That includes W-2s or 1099s, pay stubs, bank statements, and investment account statements. Your HELOC lender will check your credit score and credit history. It will also want to see the most recent mortgage statement for any existing home loans and proof of your ownership.
To give you an idea, here’s one HELOC lender’s full list of what you need to apply:
- Personal information (name, home address, phone number, and social security number)
- Co-applicant’s personal and employer information, if applicable
- Employer information (name and phone number of employer)
- Financial assets (description, financial institution, and value)
- Financial debt (lender name, payment amounts, and balances)
- Collateral information (asset, lender name, balance/value, and description
Sample list of HELOC documents from Trust Bank. Required documentation varies by lender.
If you’ve moved or changed jobs in the past two years, be prepared to provide details of previous addresses and employers.
If you apply for a HELOC online, you can quickly scan and upload documents. Alternatively, you can photocopy them and either mail or drop them off at a nearby branch if available.
Connect with a HELOC lender to start your application4. Wait for approval
After you’ve applied for a HELOC, you’ll wait for final approval. This process can take anywhere from a few days to several weeks, depending on the lender’s workload and whether you need an in-person appraisal. If you’re in a rush, ask lenders about their appraisal procedures and typical wait times before applying.
Timing will also depend on how quickly you submit financial documents and respond to questions or conditions the lender sends back.
Underwriting
During underwriting, the lender will thoroughly review your finances and credit history to determine whether you qualify for the loan. If the underwriter spots an anomaly or has any doubts, expect a call asking for clarification or additional documents. The sooner you help resolve any issues, the faster you can get your hands on your line of credit.
Home appraisal
Since your equity secures a HELOC, lenders almost always require a new home appraisal to determine the property’s current market value. This helps the lender calculate how much equity you have and determine your maximum loan amount.
Nowadays, many appraisals are conducted online using resources like Google Street View and public sales records in your neighborhood. These methods are usually cheaper, quicker, and less disruptive for the homeowner. However, a lender might still require an in-person appraisal. This is most likely if your home is difficult to compare with others or if you’re applying for a large line of credit.
Remember that although the appraisal extends the approval process, it can also work to your advantage. Home values have increased sharply in recent years, so many homeowners have built equity quickly. You might be able to borrow more than you originally expected.
5. Close on the loan
Once you receive final approval on your HELOC, you’ll pay any closing costs due and sign the final loan documents. Note that it will take a few days before you can access the HELOC credit line. Technically, you’ll have to wait until midnight on the third business day after the closing date. That’s the “rescission” period, during which you can walk away from your HELOC if you change your mind (unless it’s secured on a home other than your principal residence).
6. Access your home equity line of credit
Once a HELOC is established, homeowners can access the funds in several ways. Each lender can select its own method(s) of HELOC funding. Most offer one or more of the following options:
- Checkbook
- Debit card
- Electronic transfers (online or by phone)
- In-branch cash withdrawals
You shouldn’t find it hard to use your line of credit.
How long does HELOC approval take?
Getting a HELOC usually takes between two and six weeks. The timeline mainly depends on the lender’s efficiency, your responsiveness to inquiries, the size of the credit line you request, and how easy your home is to appraise. Thirty to 60 days is a reasonable estimate, unless there are unexpected delays during the process.
Check your HELOC options. Start hereSome lenders pride themselves on quick HELOC turnaround times, and you may see this advertised on their websites. If you’re eager to get the money fast, you might want to choose one of those. However, you should still do your due diligence and compare rates and costs beforehand. Make sure you’re not paying a premium for quick access to cash.
Is it hard to get a HELOC?
If you have plenty of home equity and a good credit score, getting a HELOC should be relatively easy. But, as with any mortgage, the amount you can borrow and the interest rate you’re offered depend heavily on your financial situation.
Verify your HELOC eligibility. Start hereMany lenders require a credit score above 680 or even 700 to get a HELOC. However, some allow FICO scores as low as 620 in certain cases. Likewise, some lenders need a debt-to-income ratio below 43%, while others accept up to 50%. Loan-to-value ratio requirements usually range from 80% to 85%.
Remember that lenders prefer borrowers with high credit scores, low debt ratios, and a comfortably thick “equity cushion” (meaning you’re not borrowing the maximum amount available). The best interest rates usually go to borrowers with FICO scores above 700. Lower-credit homeowners and those with maxed-out borrowing amounts could face significantly higher rates.
If your application is strong in one or two areas and weak in others, a sympathetic lender might be willing to help. For example, if your credit score is low but you only plan to use a small portion of your equity and have few existing debts, you could still get approved.
FAQs about getting a HELOC
Connect with a HELOC lender to start your applicationHELOCs usually require a credit score of 680 or higher and a debt-to-income ratio of 43 percent or lower. You also need a stable income and employment to qualify for the loan. Most HELOC lenders let you borrow up to 80 or 85 percent of the home’s value, so you typically need more than 15 to 20 percent equity before getting a HELOC.
HELOC closing costs could be as much as two to five percent of your maximum credit limit. Some lenders offer HELOCs with no closing costs, but these may have higher interest rates. Be sure to check rates and fees when applying for a HELOC.
Don’t worry about your credit score when shopping for a HELOC. FICO will count all your applications as a single one as long as you get all your quotes within a two-week period. And a mortgage application typically dings your score by just five points or less. That said, it’s often best to get all your HELOC quotes on the same day. Interest rates can change from one day to the next, and getting estimates on the same day will provide you with a better head-to-head comparison.
Almost all HELOC lenders require a new home appraisal to verify the home’s current value. Some lenders allow online appraisals, which can be faster and more efficient. But some HELOC applications still require a traditional, in-person appraisal.
Some lenders enforce a waiting period of up to six months before you can get a HELOC. But not all lenders do, so shop around for one that could approve you sooner. Remember that you need more than 15 to 20 percent equity before qualifying for a HELOC. If you made a big down payment when you bought the home, you might be able to get a HELOC right away. But if you made a small down payment, you’ll have to wait until you’ve built up enough equity to borrow against. Rising home values add to your equity and may allow you to get a HELOC sooner.
Your next steps
If you’re ready to get a HELOC, start by comparing rates and finding the most affordable lender for your situation. HELOC rates and fees can vary significantly between lenders, so obtaining quotes from multiple companies could save you a lot of money.
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