Home equity
Do you qualify for a home-equity loan?
The short answer
A lender checks four things. Miss one and the loan stalls.
- Enough equity — lenders cap what you can borrow at about 80–85% of the home's value.
- A credit score in good shape, often 680 or higher for a solid fixed rate.
- A debt-to-income ratio around 43% or below.
- Steady, documented income and a clean payment record.
- The catch: strong equity alone won't carry a weak score or a high debt-to-income ratio.
A home-equity loan borrows against the part of your home you already own. The lender wants proof you can pay it back and that the house covers the loan if you can't. Three numbers do most of the deciding.
15–20%
Equity you usually keep — lenders cap combined loan-to-value around 80–85%.
~680+
A common minimum credit score for a good fixed rate.
≤43%
A typical maximum debt-to-income ratio.
The four checks, plainly
- Enough equity. Lenders look at your combined loan-to-value, or CLTV — every loan against the home, added up, as a percent of the home's value. Most cap CLTV around 80–85%. On a $400,000 home, an 85% cap means all your loans can reach $340,000. If you still owe $250,000, that leaves about $90,000 to borrow.
- A credit score in good shape. A score of 680 or higher tends to unlock a solid fixed rate. Lower scores can still qualify, but the rate climbs, and the total cost climbs with it.
- A workable debt-to-income ratio. Debt-to-income, or DTI, is your monthly debt payments divided by your gross monthly income. Many lenders want 43% or below, including the new payment. High DTI is the quiet reason plenty of equity-rich owners get turned down.
- Steady, documented income and a clean record. The lender wants pay stubs, tax returns, or both — proof the income is real and stable — plus a payment history without recent misses.
Want to know whether this loan fits your situation at all, not only whether you'd qualify? Read who a home-equity loan is for.
How to improve your odds
If a number falls short, you can move it before you apply.
- Pay down debt. Clearing a card balance lowers your DTI fast and lifts your score at the same time.
- Build the score. On-time payments and lower balances raise it over a few months. Our build credit guide walks through the moves.
- Wait for more equity. Paying down the mortgage, or a rise in the home's value, gives you more room under the CLTV cap.
⚠ The catch
Strong equity alone won't carry a weak score or a high debt-to-income ratio. A lender weighs all four checks together.
So fix the score and the DTI first. That way a lender's hard pull — which dings your credit on its own — isn't a wasted check on an application that was never going to clear.