Understanding HELOC Requirements

Want to make improvements to your home or boost its value but don’t have the cash on hand? Opening a line of credit is a great opportunity to dip into your home equity, in the form of a home equity line of credit (HELOC). Getting a HELOC from a financial institution gives you access to money (typically in the tens of thousands) to invest in home upgrades, based on how much equity you have.

However, what stands between most homeowners and getting a HELOC is understanding the nitty-gritty of the requirements and how to navigate them.

Typically, the process involves pulling credit checks, equity assessments, and financial paperwork. At People’s Community Federal Credit Union, we’re here to help you through every step of the HELOC process so that you don’t get overwhelmed by the red tape while trying to achieve your home improvement goals. Read on to learn more about navigating HELOC requirements.

What Is a Home Equity Line of Credit (HELOC)?

Having a HELOC is a flexible way to borrow money, based on the equity you’ve built up in your home. 

A home equity loan functions like a traditional loan, where you borrow a specified amount to pay back in payment installments. On the other hand, a line of credit allows you to borrow more than once, with continued access to funds as you pay them back. A HELOC functions more similarly to a credit card, with your home as collateral. 

However, many homeowners hesitate to apply because the concept of “borrowing against your home” can sound risky and complicated. 

The typical red tape around applying for a HELOC can be daunting. At People’s Community Federal Credit Union, we’re here to help you navigate the process to achieve your home improvement goals. Read on to learn more about what you’ll need to qualify for a HELOC.

Requirements for a HELOC

When financial institutions consider HELOC requirements, you can expect them to look over your home equity, credit history, and debt-to-income ratio. But of course, it can get more complex than that.

What Is Required to be Approved for a HELOC?

Here’s what to expect from a HELOC application:

• Sufficient home equity: Generally, you need more than 20% equity in your home.
• Stable income: Proof of income to show you can meet the payments.
• Acceptable credit score: While we’re flexible, credit history does play a part.
• Decent debt-to-income ratio: Your existing debts shouldn’t be overwhelming.
• Property appraisal: We need to know the market value of your home.

What Disqualifies You for a HELOC?

It’s also important to know what might stop you from getting an approval:

• Insufficient home equity: Less than 20% equity can be a dealbreaker.
• Unstable income: If income isn’t consistent, it can pose a risk.
• Low credit score: Significantly low scores might need work before proceeding.
• High debt-to-income ratio: Too much existing debt can disqualify you.

Credit Scores and HELOCs

Typically, a good to excellent credit score is required to qualify for a HELOC.

But keep in mind that a certain score may not always be sufficient for an approval – so you may have to consider focusing on other requirements or getting a co-signer if your credit score isn’t looking great. At People’s, we understand that you’re more than a number. Once approved, all our members receive the same low rates, regardless of their credit score.

Is it Difficult to Get Approved for a HELOC?

Yes, it can be difficult to get approved for a HELOC if you don’t meet the requirements, or barely meet them. 

But when you speak with a lender with a friendlier approach, like us at People's Community Federal Credit Union, you’ll get the help to understand your finances during the application process. Our cooperative approach means we’re more than a checklist. Yes, we consider the financial details, but we also consider you. 

Boost Your Home Value with One of Our Lines of Credit

Why choose us for your HELOC? Because we see the bigger financial picture. We offer lines of credit that adapt to you – complete with competitive rates and the kind of personal touch that makes all the difference.

Your home equity is waiting to be your financial ally.

Ready to unlock your home’s potential? Give us a call today or fill out a contact form here to speak with one of our representatives. You can also drop by one of our branch locations.