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HELOC Eligibility Requirements and Qualifications

A Home Equity Line of Credit (HELOC) is a type of loan that’s based on the amount of equity you have in your home. HELOCs are offered by credit unions, banks, and some online lenders.
A HELOC provides a line of credit, much like a credit card, so you can borrow as much as you’d like (up to the limit of your line of credit) and only pay interest on the borrowed amount. Most HELOCs have a variable interest rate. HELOC credit score requirements may start at 660, but some lenders will require a higher score.
Your current mortgage company may also offer a HELOC. Each lender will have a unique set of home equity line of credit requirements that a borrower must meet to be approved for the loan.
A Home Equity Loan is another type of loan that is based on home equity, but Home Equity Loans provide the loan in a lump sum that will be paid back at a fixed interest rate. Once you receive the funds repayment begins immediately and monthly payments are based on the full amount of the loan.
At Credit Union of Southern California (CU SoCal), we make getting a Home Equity Line of Credit (HELOC) easy.
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our home equity lines of credit, auto loans, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all of your banking needs. Get Started on Your Home Equity Line of Credit (HELOC)

Qualifying for a HELOC

Before obtaining a HELOC, you must first have enough equity in your home, in addition to several other requirements.
Read on to learn more about HELOC eligibility requirements.

What Is A HELOC and How Does It Work?

A Home Equity Line of Credit (HELOC) is provided by a credit union or bank, comes with a credit limit, and typically has a variable interest rate. As a “secured loan,” lenders require that the borrower put up security or collateral (in this case the borrower’s home) to secure the funds.
Because the borrower’s home is used as collateral, if the loan is not repaid or monthly payments are paid per the loan agreement, the lender can take possession of the home through a foreclosure.
Learn more at What is a HELOC?

What Can You Use A HELOC For?

A home equity line of credit typically has a lower interest rate compared to a credit card, which makes it a more affordable choice for making expensive purchases.
While the money from a HELOC can be used for any type of purchase, some common uses are home renovations, purchasing a second home or investment property, starting a small business, college tuition, and paying off high interest debt.
Smaller dollar purchases, such as appliances, auto repairs, or a vacation may be better funded through a personal loan, which doesn’t require that your home be used as collateral. 

How Much Can You Borrow With A HELOC?

The loan amount that will be offered to you will depend on your lender’s HELOC eligibility requirements. HELOC qualification requirements include your credit score, how much equity you have in your home, the lender’s maximum loan limit, and a combination of other requirements that may be unique to each lender. Most credit unions and banks will generally lend between 70% to 85% LTV (loan-to-value) based on your home equity.

HELOC Qualification Requirements

Each lender will have a unique set of HELOC qualification requirements for borrowers, some of which are listed below:
15-20% Equity In Home: Equity can be looked at as the amount of the home you own. A homeowner who doesn’t have a mortgage loan has 100% equity in their home. To calculate equity, subtract the mortgage amount from the appraised or market value amount. For example: Appraised value $600,000 – Amount owed on mortgage $250,000 = $350,000 equity. Divide the equity ($350,000) by the home value ($600,000), which is 58% equity.
Good Repayment History: Your credit history includes your record of loan repayments and debt repayments. As you pay off credit cards and other debt, these payments are reported to the three major credit bureaus: Experian, TransUnion, and Equifax.
These credit bureaus each create a credit report for every individual who has ever applied for credit and/or taken out a loan. The better your debt/loan repayment history, the better your credit score will be.
FICO Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).
Good Credit Score: Credit scoring companies, including FICO, the most notable company, calculate a person’s credit score based on information in their credit reports. Most lenders have a HELOC credit score requirement of 660, although some lenders may require a higher score. The higher your credit score, the better (lower) the interest rate you’ll be offered on a HELOC and other loans.
Have Adequate Income: In addition to looking at a borrower’s home equity, credit score and credit history, lenders will ask to see proof of employment and proof of income. Income will be used to calculate the borrower’s debt-to-income ratio (DTI). 

Debt-To-Income Ratio

 According to, debt-to-income ratio (DTI) is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow. The 43 percent debt-to-income ratio is important because, in most cases, that is the highest ratio a borrower can have and still get a qualified mortgage (one that meets certain federal guidelines).
DTI is calculated by adding all of your monthly debt payments and dividing that number by your gross monthly income. For example: If you pay $1,800 a month for your mortgage and pay $350 a month for an auto loan, then $1,800 + $350 = $2,150 monthly debt. If your gross monthly income is $6,000, then your debt-to-income ratio is 35%. ($2,150 ÷ $6,000 = .35). 

What To Do If You Don't Qualify For A HELOC

If you don't meet HELOC credit score requirements or a lender’s home equity line of credit requirements due to a low credit score or having too little equity in your home, there are other options.
If you don’t need the money right away, there are ways to improve and build credit over the course of six months to a year.
You can build and improve your credit score with a credit builder loan, by requesting a free credit report and correcting any reporting errors, and paying-off outstanding debts.
Learn How to Rebuild and Improve Your Credit Score and follow these 8 Tips for Building Credit

HELOC Alternatives

In today’s broad lending environment, there are HELOC alternatives for people who prefer not to use a HELOC and those who do not meet the HELOC qualifications. Alternatives include:
Cash-Out Refinance: With mortgage interest rates very low, refinancing your current mortgage to a new mortgage loan could help you lower your monthly payments. Getting cash-out means borrowing more than what you owe on your current mortgage and get a cash disbursement of the extra funds at closing. You can use the cash any way you choose
Personal Loans: Credit unions and banks offer a wide variety of secured and unsecured personal loans to meet a wide variety of borrowing needs. You’ll find variable and fixed rate personal loan options.
Family Loans: You may have family members that are willing to loan you the money you need; however, this type of loan can damage the relationship if you fail to pay back the money. If you borrow money from a family member, always put in writing what the re-payment terms will be.
0% APR Credit Cards: There are many credit cards that offer a promotional 0% APR (annual percentage rate) for a fixed period, usually 12 months. After the promotional rate expires, there will be a new higher rate applied to the outstanding balance, so be sure you know what the post-promotional rate will be. This option can be good if you need extra money in the short term.
CD Loan: A CD is a Certificate of Deposit — a type of savings account offered by credit unions and banks. This type of loan uses your CD account as collateral. The lender will add a small percentage interest fee to the CD’s APY (annual percentage yield) to come up with the amount you will be charged to borrow money using your CD as collateral. 

Is A HELOC Right For You?

When shopping for a loan, always speak to several lenders and make sure you understand the HELOC eligibility requirements, terms, fees, interest rate, and repayment requirements of the loan you are looking at.
Deciding whether a HELOC is right for you is a serious matter, as it involves using your house as collateral. If you will be using the funds to increase the value of your home, a HELOC could make sense. If you need money to take a vacation or make luxury item purchases, then an unsecured personal loan would be a safer option. 


At CU SoCal, we make qualifying for a HELOC stress-free! We offer an interest-only HELOC, so you pay only the interest due each month, giving you the flexibility to keep payments low during the 10-year draw period of your loan. We offer the choice a lump-sum loan or a revolving credit line that can be used over and over again.
Other great HELOC features include: 
  • Access up to 80% of your home's equity.
  • No points.
  • No appraisal fees for single unit loans.
  • No annual fee.
  • No closing costs.
  • Loan limit up to $250,000.
To learn more and see all HELOC disclosures and special offers, visit our HELOC webpage. 

Why Savvy Consumers Choose CU SoCal

For over 60 years CU SoCal has been providing financial services, including HELOCs, car loans, personal loans, mortgages, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation consultation with one of our HELOC experts.

Get Started on Your Home Equity Line of Credit (HELOC)

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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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