Home equity lines of credit are how mortgage borrowers can take equity out of their house without selling it. When dealt with responsibly, a HELOC can be a fantastic benefit of homeownership. Responsible homeowners take out a HELOC to invest in necessary home renovations in order to increase the value of their home. However, you might not qualify for this homeowner benefit if…
You don’t earn enough money
You could have north of 50% equity in your home, but if a lender doesn’t trust that your income is substantial enough to pay off your mortgage loan, you will not qualify for a HELOC.
You have too many debts
Lenders will rarely approve a loan for someone who is spending more than 43% of income on debt, including mortgages, car payments, credit card payments and student loan debt.
Your home value isn’t high enough
While home values have risen, 9.7% of homes are still seriously underwater, with mortgages exceeding 90% of their value.
Your credit score isn’t high enough
Lenders are requiring higher credit scores for HELOCs, with the best rate going to those with top-tier scores. In my experience, anything under 680 and you will likely not qualify.
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