Quicken Loans HELOC Requirements: A Complete Guide

A home equity line of credit (HELOC) can be a useful financial tool for homeowners looking to tap into their equity. HELOCs allow you to access funds as needed up to a set credit limit. The funds can then be used for home renovations, debt consolidation, educational expenses and more.

When it comes to getting approved for a HELOC, lenders like Quicken Loans have specific eligibility requirements borrowers must meet While criteria varies by lender, there are general guidelines to be aware of.

In this guide, we’ll break down key factors that determine HELOC eligibility with Quicken Loans. Keep reading to learn about qualifying credit scores debt-to-income ratios home equity requirements and more.

What is a HELOC?

Before diving into the requirements, let’s quickly review what a HELOC is and how it works.

A home equity line of credit functions similarly to a credit card tied to your home’s equity. Like a credit card, you’re given a set spending limit and can access funds as needed until you reach your credit line.

With a HELOC, the lender uses your home as collateral for the loan. You can then borrow against the existing equity in your home up to an approved amount.

HELOCs come with a draw period, usually 10 years, where you can withdraw money as you need it. You’ll only have to pay interest on what you actually borrow during this time.

Then a repayment period starts, typically lasting 15 to 20 years. At this point, you can no longer withdraw money and must pay back the principal plus interest.

Now let’s look at what it takes to qualify for a HELOC with Quicken Loans.

HELOC Credit Score Requirements

Your credit score plays a big role in HELOC eligibility. The higher your credit score, the better chance you have of getting approved and securing a low interest rate.

According to Quicken Loans, borrowers typically need a minimum credit score in the mid-600s to qualify for a HELOC. However, a credit score of 720 or higher is considered ideal and will make for the best terms.

Here’s a general breakdown of required credit scores:

• Excellent credit (720+): Best chance at approval and lowest interest rates
• Good credit (680-719): Likely to be approved at decent rates
• Average credit (620-679): May be approved but will pay higher rates
• Poor credit (below 620): Unlikely to be approved

Before applying, it’s wise to check your credit reports and scores from the three major bureaus – Equifax, Experian and TransUnion. This will allow you to identify and resolve any errors or issues that could negatively impact your score.

You can also work on improving your credit prior to applying by paying bills on time each month and paying down balances on credit cards and other debts.

How Much Home Equity is Needed?

The equity in your home refers to the current market value of your property minus any outstanding mortgage loan balances. Lenders require you to have enough equity built up to approve a HELOC.

With Quicken Loans, you typically need around 20% equity in your home to qualify for a HELOC. So if your home is worth $300,000 and you owe $200,000 on your mortgage, you have $100,000 in equity. This represents 33% equity, making you a strong candidate.

The more equity you have, the higher your chances of getting approved for a HELOC with the lender. You’ll also likely qualify for a higher credit limit.

It’s important to note that home values can fluctuate over time. If values suddenly dip, you may end up with less equity than when you were first approved. This is something to keep in mind if applying during periods of housing market volatility.

Debt-to-Income Ratio Requirements

Your debt-to-income (DTI) ratio also plays a role in HELOC eligibility. This ratio compares your total monthly debt payments to your gross monthly income.

Most lenders prefer your DTI to be 43% or lower when factoring in the potential HELOC payment. A lower DTI indicates you have sufficient income coming in to manage the additional debt obligation.

For example:

• Gross monthly income = $5,000
• Current mortgage payment = $1,000
• Monthly credit card payments = $250
• Estimated HELOC payment = $250
• Total monthly debt payments = $1,500
• $1,500/$5,000 = 30% DTI

In this case, the DTI is comfortably below 43% which looks favorable to lenders. If your DTI exceeds 43%, you may need to pay down existing debts or opt for a lower HELOC limit.

Payment History Requirements

Lenders will thoroughly evaluate your payment history when reviewing a HELOC application. This helps them gauge your ability to responsibly manage debt.

Ideally, you will have a track record of making monthly mortgage payments, credit card payments, auto loans and other bills on time. Any missed or late payments from the past several years could jeopardize your chances.

Foreclosures and bankruptcies within the past seven years will also weigh heavily on HELOC eligibility. You will likely need to wait until they no longer appear on your credit report.

Income Requirements

Lenders want to see you have sufficient income to manage repayment of the HELOC. Quicken Loans will ask for documents to verify your income sources and amounts.

This typically includes W-2s, recent pay stubs, bank statements and tax returns. Self-employed borrowers may need to provide profit and loss statements.

There are no set minimum income thresholds, but higher and more stable income will always help your chances. Gross monthly income from all sources is used to calculate your DTI as well.

Retirees and others without traditional employment income can still qualify by demonstrating healthy assets, Social Security benefits, pensions and other recurring income streams.

Quicken Loans HELOC Limits

The amount of home equity you have dictates the maximum HELOC limit you can obtain. Lenders will not approve you for more than your available equity.

With Quicken Loans, HELOC limits typically range from $25,000 up to $500,000. Those with higher home values and equity amounts may qualify for even more.

It’s also important to only borrow what you reasonably need and can comfortably afford to repay. Don’t max out your credit line without a plan.

Documentation Needed

Finally, to apply for a HELOC with Quicken Loans, you need to prepare all required documentation. Plan to provide:

• Identification documents like driver’s license, passport or military ID
• Past 2 year’s tax returns
• W-2s from the past 2 years
• Pay stubs covering the past 30 days
• Last 2 month’s bank statements
• Mortgage statements confirming home value and loan balance
• Other income documentation as applicable

Having these documents ready will help streamline the application process. The lender can efficiently verify your eligibility based on the info provided.

The Takeaway

While specific HELOC requirements vary, Quicken Loans looks for credit scores of 620+ (with 720+ being ideal), around 20% home equity, and a DTI under 43% among other criteria. By understanding eligibility guidelines, you can decide if you may qualify and prepare accordingly.

HELOCs offer homeowners flexibility in accessing funds tied to their equity. But borrow responsibly, shop lenders, and only tap what you realistically need. With proper planning, a HELOC can be an effective financial move. Just be sure you meet the lender’s requirements first.