What do you need to qualify for a home equity loan? Here are the requirements.

Core Insights - Home equity loans allow homeowners to borrow against the equity built in their homes, which is the difference between the home's market value and the outstanding mortgage balance [2][3][17] - Lenders typically require a minimum of 15% to 20% equity in the home to qualify for a home equity loan, and they usually cap the loan amount at 80% of the available equity [5][6] Home Equity Loan Mechanics - Home equity loans are secured loans that use the home as collateral, typically featuring fixed interest rates and requiring regular monthly payments over a term that can extend up to 30 years [3][17] - The amount accessible through a home equity loan is determined by the market value of the home minus the mortgage balance [3] Qualification Requirements - Homeowners must meet several criteria to qualify for a home equity loan, including sufficient home equity, good credit scores, and low debt-to-income ratios [4][7][8] - Most lenders require a minimum credit score of 680, while a debt-to-income ratio of 43% or less is generally preferred [7][8] Documentation Needed - To apply for a home equity loan, borrowers must provide proof of income, homeowners insurance, and a home appraisal to determine current market value [9][11][12][16] - Essential documents include recent mortgage statements, tax returns, bank statements, and identification [16] Common Reasons for Denial - Applications for home equity loans can be denied due to insufficient equity, poor credit history, high debt-to-income ratios, or inability to prove sufficient income [14]