Jun 2, 2025
HELOC Requirements: Are You Eligible for a Home Equity Line of Credit?
<p>A big benefit of homeownership is the ability to build equity (the difference between your home’s value and the balance you owe on your mortgage). As you pay down your mortgage or the value of your home increases, that equity grows. Once you’ve built enough, you may be able to borrow against it through a home equity loan or <a target="_blank" href="/loans/heloc">home equity line of credit (HELOC)</a>. </p><p>While the qualifications for both are similar, the key difference is how the funds are accessed. A home equity loan gives you a one-time lump sum, typically with a fixed repayment schedule. A HELOC, on the other hand, works more like a credit card with a revolving line of credit you can draw from as needed. We offer <a target="_blank" href="/resources/blog/metro-blog/2025/03/10/fixed-or-variable-rate-heloc--which-one-suits-your-needs">both fixed-rate and variable-rate HELOCs</a>, giving you the flexibility to choose what fits your financial goals.</p><p>Here’s what you need to know about qualifying for a HELOC in 2025.</p><img alt="" src="/images/default-source/blog-article-images/heloc-qualifications-post-image.png?sfvrsn=2f2a9ded_1" sf-size="100" /><h3>What is a Home Equity Loan?</h3><p>A home equity loan allows you to borrow money against the equity you’ve built — the difference between your home’s current value and what you still owe on your mortgage and any other liens.</p><p>For example, if your home is worth $250,000 and you owe $150,000, you might have up to $100,000 in equity. You can use that equity to borrow money for things like home renovations, a dream wedding, debt consolidation or other big expenses, typically with a lower interest rate than credit cards or personal loans.</p><h3>What is the Difference Between a Home Equity Loan and a HELOC?</h3><h4>Home Equity Loan</h4><p style="margin-left:30px;">Sometimes referred to as a second mortgage, this type of loan gives you the money all at once. It typically comes with a fixed interest rate and a structured repayment plan at regular intervals over a set period. </p><h4>HELOC</h4><p style="margin-left:30px;">A home equity line of credit allows you to borrow as needed, up to a set limit. You can tap into the line multiple times during the draw period, only paying interest on what you use.</p><h3>FIXED VS. VARIABLE RATE HELOC: WHAT IS THE DIFFERENCE?</h3><h4>What is a Fixed Rate HELOC?</h4><p style="margin-left:30px;">With this option, you lock in a fixed interest rate for the duration of your credit line. Even though your payments may vary based on how much you borrow, the interest rate stays the same, offering you predictability and stability. This means you can borrow funds as needed at the same fixed rate throughout the draw period.</p><h4>What is a Variable Rate HELOC?</h4><p style="margin-left:30px;">A variable rate HELOC doesn’t lock in your rate. Instead, it fluctuates with the market conditions. Metro’s variable rate HELOC has a 12-month introductory rate, after which the rate becomes variable. This option may be ideal if you expect to pay off the balance quickly or are comfortable with rate changes.</p><h3>REQUIREMENTS FOR A HOME EQUITY LINE OF CREDIT (HELOC)</h3><h4>Enough Equity in Your Home</h4><p style="margin-left:30px;">The more equity you have, the more you may be eligible to borrow. HELOC loans are available up to 90% of the appraise value.</p><h4>Good Credit Score</h4><p style="margin-left:30px;">A good credit score shows that you’ve been responsible with credit in the past. Typically, a score of mid 600s is the minimum, but the better your score, the lower interest rates and better terms.</p><p style="margin-left:30px;">We share updated FICO® Scores with members quarterly via online banking under the tools section. Checking your FICO® Score regularly is a smart way to stay on top of your credit. It helps you identify any changes and make better financial decisions to improve your score if needed. If you are not sure what a good credit score is, <a target="_blank" href="/resources/blog/metro-blog/2024/09/03/credit-scores-whats-good-average-and-bad">check out our blog post</a> to learn what’s considered good, average, or bad.</p><h4>Proof of Income</h4><p>You’ll need to show that you can afford to repay the loan. Lenders will ask for your income, job history, and may want to see recent pay stubs, tax returns, or other documentation to prove that you have consistent income.</p><h4>Low Debt-to-Income (DTI) Ratio</h4><p style="margin-left:30px;">Lenders will also consider your debt-to-income (DTI) ratio. This measures how much of your monthly income goes toward debt payments. To calculate your DTI ratio, add up the monthly payments on the loans and expenses you have, then divide them by your monthly income before taxes.</p><p style="margin-left:30px;">A lower DTI ratio shows lenders that you’re not overextended with your debt. While 36% is considered ideal, anything under 43% is generally viewed as good. In some cases, you may even qualify with a higher DTI, depending on other factors.</p><h4>Proof of homeowners insurance</h4><p style="margin-left:30px;">To qualify for a home equity loan, you must provide proof of your current homeowners insurance policy. Homeowners insurance protects you against an unexpected financial loss and it also protects your lender’s investment in case of a disaster. </p><h4>Home appraisal </h4><p style="margin-left:30px;">Home equity loans usually require an appraisal to determine the current market value of your home and how much equity you have to borrow from.</p><p> </p><hr /><p> </p><h3>WHY CHOOSE METRO CREDIT UNION FOR YOUR HOME EQUITY LINE OF CREDIT?</h3><p>Whether you're interested in a lump sum loan or a flexible way to access funds for a home renovation, debt consolidation, or unexpected expenses, a HELOC from Metro Credit Union offers the support and flexibility you need.</p><p>As one of Omaha’s trusted HELOC lenders, we offer:</p><ul><li>Fixed and variable rate options</li><li>Competitive interest rates</li><li>Options for up to 90% of the equity of your home</li><li>Fast approvals</li><li>Personalized member service</li></ul><p>Once you’ve reviewed the requirements and believe you may be eligible, gather your documents and apply online. Our mortgage team will walk you through your options, review your home’s value, and help you determine what makes sense for your situation.</p><h4>Start making the most of your home’s equity today. Contact Metro Credit Union or visit a branch near you.</h4><div><br /></div><p> </p>
Utilizing the equity in your home is a huge benefit of ownership, but how do you know if you're eligible? Let's delve into the qualifications needed to get approved for a home equity line of credit.
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