One of the best parts of owning a home is its growing equity. Between making your mortgage payments and home appreciation, your equity increases substantially over the years. Once you have at least 20% equity in your home, you may be able to borrow some of that cash with a home equity loan. Whether you want to renovate your home or pay off credit card debt, a home equity loan can get you thousands in cash for whatever you want to purchase. Learn about how to qualify for a home equity loan in 2025 below, and if you have questions or want to apply, one of our loan professionals can help.

What Is a Home Equity Loan?

What Are Home Equity Loan Requirements in 2024?

A home equity loan is a fixed-rate second mortgage that can be used to take out some of the equity in your home. This loan, if approved, gives you a lump sum of cash that you can use for whatever you like. A home equity loan is backed by the property, so you can usually get a lower interest rate than on credit cards or personal loans. If you are more financially conservative, a home equity loan may be a smart decision because of its fixed rate. A home equity line of credit (HELOC) is similar to a home equity loan, but HELOCs have a variable interest rate.

Home equity loans are rising in popularity in 2025 as rising interest rates have led to some credit cards charging 20% or more in interest annually. A home equity loan could save you thousands in interest every year and may be the ideal low-interest loan choice this year. As of March 2024, the average home equity loan rate in the US is 8.80%.

Every lender has different loan requirements, but these are generally the standards for a home equity loan:

20% Equity in The Property

Equity is the difference between what is owed on the first mortgage and the home’s current value. For example, if you have a first mortgage balance of $150,000 and your house is valued at $450,000, you have a loan-to-value (LTV) of 33%. This is more than enough equity to qualify for most home equity loans, if you meet the other requirements.

Decent Credit

Many lenders will allow you to get a home equity loan if your credit score is in the mid-600s, while others will require a 680 score. However, you will need a higher credit score to get the best interest rate. If you have a 620 score, you still might get a home equity loan, but the lender may require you to have more equity or have less debt.

Debt-To-Income (DTI) No Higher Than 43%

DTI measures how much of your gross monthly income is paid to debts. DTI calculations include your mortgage, credit cards, car loans, child support, student loans, etc. The DTI to qualify for a home equity loan varies, but many lenders prefer the applicant have a maximum 43% DTI, and lower is better. You could get a better rate on the loan if you have a lower DTI, so work on paying off debts before applying.

Enough Income

There is no exact income requirement for getting a home equity loan; income standards depend on the amount of money being borrowed and how much debt you have. You do need to make enough money to meet the lender’s DTI standard for how much money you want to borrow. You also need to prove that you have a consistent monthly income. So be ready to provide pay stubs, W-2s, bank statements, and tax returns.

Summary

A home equity loan is a popular way in 2024 to get the cash you need at a reasonable rate. Interest rates are higher for home equity loans than three or four years ago, but you still can save a bundle by tapping your equity instead of maxing out your credit cards. Talk to your lender today about the different home equity loans that are available.

 

facebookShare on Facebook
TwitterTweet
FollowFollow us