Getting Your First HELOC: Step-by-Step Guide

What is a HELOC?

A HELOC is a revolving line of credit secured by your home's equity. Unlike a home equity loan that gives you a lump sum, a HELOC works like a credit card: you can borrow, repay, and borrow again up to your credit limit.

Key HELOC Features:

• Revolving Credit: Borrow and repay as needed
• Draw Period: Usually 10 years to borrow
• Repayment Period: Usually 10-20 years after draw period
• Variable Rate: Tied to Prime Rate
• Interest-Only Payments: During draw period (minimum)

HELOC Requirements

• Credit Score: 620+ (680+ for best rates)
• Home Equity: Usually 15-20% minimum
• Debt-to-Income Ratio: Usually under 43%
• Stable Income: 2 years employment history preferred
• Home Appraisal: Lender will verify home value

Calculate Your Available Equity

1. Get your home's current market value (Zillow, appraisal, or tax assessment)
2. Subtract your mortgage balance
3. That's your equity
4. Most lenders allow 80-85% combined LTV (mortgage + HELOC)

Example: $500,000 home value, $300,000 mortgage
Equity: $200,000
At 80% LTV: $500,000 × 80% = $400,000 - $300,000 = $100,000 available HELOC

Where to Apply

1. Credit Unions: Often best rates (0.25-0.5% lower)
2. Local Banks: Relationship benefits, personal service
3. Big Banks: Convenient but often higher rates
4. Online Lenders: Competitive rates, fast process

Application Process

1. Research and compare lenders (get 3-5 quotes)
2. Pre-qualification (soft credit check)
3. Submit formal application
4. Home appraisal
5. Underwriting review
6. Closing (sign documents)
7. Funding (access your HELOC)

Timeline: 2-4 weeks typically

Documents You'll Need

• Government-issued ID
• Social Security number
• Proof of income (pay stubs, tax returns, W-2s)
• Proof of employment
• Current mortgage statement
• Homeowners insurance
• Property tax records
• Bank statements (2-3 months)

Tips for Approval

• Pay down credit card balances before applying
• Don't open new credit accounts
• Fix any errors on your credit report
• Have all documents ready
• Be honest on application
• Shop around but submit applications close together

What to Look for in a HELOC

• Interest Rate: Lower is better, check the margin over Prime
• Fees: Annual fees, closing costs, early termination fees
• Draw Period: 10 years is standard
• Access: Checks, debit card, online transfers
• Promotional Rates: Introductory offers can save money

Related Articles

• HELOC Rates in 2026: Is Now the Right Time for Velocity Banking?
• How to Use a HELOC to Pay Off Debt: Complete Step-by-Step Guide
• Velocity Banking Without a HELOC: Alternative Lines of Credit Explained