Bank Statement HELOC Requirements for a Second Home in Texas

The Quick Read: A Texas second home is not a homestead, so the state’s strict home-equity rules do not govern a line on it; the lender’s program sets the terms, which on our wholesale network means a 640 minimum credit score, combined leverage from 75% to 90% (90% only at 720 or better), and lines up to $500,000.

• Bank statement documentation is a way to prove income, not a separate legal product. Deposits stand in for tax-return income, and the file is reviewed on documented income under the applicable program, subject to lender guidelines.
• Leverage on a second home steps up with credit: 640+ reaches 75% combined loan-to-value, 660+ reaches 80%, 680+ and 700+ reach 85%, and 720+ reaches 90%.
• The Texas homestead rules (the 80% cap, the 12-day waiting period, the one-lien limit) bind your primary residence, not the second home.
• LLC ownership does not work on this product. The borrower or a revocable living trust holds title.
• A rental that is reviewed on its own rent usually belongs in a DSCR loan instead. That is the pivot covered below.

What Is a Bank Statement HELOC on a Second Home?

A bank statement HELOC is a home equity line of credit where the lender reads your deposit history instead of your traditional personal-income documentation. The line is secured by the second home. It can sit in first or second lien position, so it can ride behind your existing mortgage without disturbing it.

A HELOC is an open-end line you borrow against more than once. The consumer finance regulator describes a draw period followed by a repayment period in its HELOC explainer. That is the same shape our network uses.

Two draw structures exist on second homes across our wholesale partners. One runs a 3-year interest-only draw with a 17-year fully amortizing repayment. The other, a longer-runway program, runs a 5-year interest-only draw with a 25-year repayment. A quoted figure always carries its own program’s structure.

Three structural facts surprise people:

• At least 75% of the line is drawn at closing. This is not a stand-by cushion you leave untouched.
• Pricing floats through both the draw and repayment periods. It never converts to fixed.
• The line is a standalone product. It does not refinance your first mortgage.

How Does Underwriting Treat a Bank Statement Line? Step by Step

Underwriting works through six checks. The first is classification, and it matters more in Texas than anywhere else. After that it is documented income, debt load, equity, credit, and the property itself.

Step 1: Classify the collateral. Is the property your primary residence, a second home, or an investment property? Occupancy at closing decides this. A second home you use personally is its own category. A property you rent out is an investment property and sits in a different leverage table.

Step 2: Document income from deposits. Lenders in the network typically review 12 or 24 months of personal or business bank statements. The lender strips out items that are not income, such as transfers between your own accounts, refunds, and loan proceeds. Personal-account deposits are generally treated as already net of expenses. Business-account deposits usually get an expense factor, or a CPA-prepared profit-and-loss statement replaces it. The lender sets that factor. You do not choose it.

Step 3: Calculate qualifying income. The math is eligible deposits divided by the number of months, reduced by the expense factor where one applies. Self-employed borrowers use this route because tax deductions shrink the income on their returns. A spouse with W-2 pay can sometimes help the file, which Lendmire covers in its piece Can a W-2 Spouse Join a Bank Statement Loan for a Second Home?.

Step 4: Run debt-to-income. Debt-to-income (DTI) compares your monthly debts to your qualifying income. The ceiling is 50%. Profiles from 600 to 679 are held to 45%, and anything above 45% needs a 680 score. The line is qualified on the interest-only payment calculated on the maximum draw, not on what you plan to borrow. A small draw plan does not shrink the test.

Step 5: Run the equity math. Maximum line equals the property value times the allowed combined loan-to-value (CLTV), minus all existing liens. CLTV is your first mortgage balance plus the new line, divided by value. Picture a second home with an existing first mortgage equal to 60% of value and a borrower with a 720 score. The 90% ceiling leaves room for a line equal to roughly 30% of value, still capped at $500,000. At a 640 score the 75% ceiling leaves about 15% of value. Same house, half the room.

Step 6: Check credit and the property. Credit comes from a single-bureau score keyed to the primary wage earner. The report can be no more than 90 days old at closing, and there are no rescores. Valuation on lines at or below $500,000 ordinarily runs through an automated valuation instead of a traditional appraisal. A higher CLTV may trigger a secondary valuation. You can also request a full appraisal in any case.

What Are the Requirements for a Second Home in Texas?

The requirements come from the lender’s program, not from the Texas Constitution. Here is how they read on our network for a second home. Every figure is a typical range from select wholesale lenders, subject to lender guidelines and full file review. This is not a commitment to lend.

Credit history standards vary by program. The longer-runway program wants two tradelines seasoned 12 months or one seasoned 24. It also wants housing history of 0x30x6 and 1x30x12 at 640 and above, applied across all financed properties.

A bankruptcy needs 4 years of seasoning from discharge or dismissal. Foreclosure history splits by program. One program seasons a foreclosure at 7 years and a deed-in-lieu, pre-foreclosure, or short sale at 4. The other declines that history regardless of age.

Property types that work are single-family residences, PUDs, townhomes, and condominiums, including non-warrantable condos. Modular factory-built homes are eligible on the longer-runway program only. The property types below are not eligible on either program:

• manufactured homes
• co-ops
• condotels
• log homes
• commercial or mixed-use properties
• agricultural zoning

Texas adds two more limits. Properties are capped at 10 acres. A property listed for sale, or listed within the past 60 days, is ineligible in Texas.

Exposure rules apply as well. A borrower can hold three lines at most. Combined exposure caps at $2,000,000 on the higher-leverage program and $750,000 on the longer-runway program. A borrower with more than 15 financed properties is not eligible.

Why Texas Homestead Rules Don’t Reach a Second Home

Texas homestead equity lending is set by Article XVI, Section 50 of the Texas Constitution. The Texas A&M Real Estate Research Center explains that this section protects the homestead from forced sale. It also governs cash-out refinances, home equity loans, and HELOCs. Its text says those loans may not be taken out on a secondary residence or on a rental or investment property. They may not be secured by property other than the homestead either.

Read that carefully. It does not say you cannot borrow against a Texas second home. It says the homestead framework is not the vehicle for it. The Texas Attorney General has explained that a lien on a homestead is void unless it secures a debt the section lists. The rule limits what can be liened against your primary residence, not against other property.

A line on a Texas second home is therefore a non-homestead transaction. The conditions below attach to the primary residence only:

For a Texas primary residence, the matrix tiers above 80% never apply. Second homes follow their own table, up to 90% CLTV at a 720 score.

Where the General Rule Breaks

Five edge cases trip up Texas borrowers more than the rest.

Borrowing against your own Texas home to fund the second one. If the collateral is your primary residence, the homestead rules apply no matter what the money buys. That means the 80% combined cap, the 12-day waiting period, and the one-lien limit. A line on the second home avoids all three.

A former primary residence turned rental. Occupancy at closing drives classification, so a converted homestead is a different transaction from the house you live in. If an old homestead equity lien is still attached, paying it off or refinancing it is a homestead matter. Sort that out with title counsel before you apply.

A second home you rent out. Once the property is an investment property, the line follows the investment table. That ceiling is 70% CLTV with no tier above it, and the minimum credit score is 700. Investment lines run the 5-year draw and 25-year repayment structure only. Part-rental use, such as a house-hack, is decided by actual use.

Title held in an LLC. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title on this product. That is the sharpest structural difference from a DSCR loan. If the property is already deeded to an LLC, you need a vesting change first, or a DSCR cash-out instead. Where an LLC is eligible on the DSCR side, it is subject to lender program eligibility.

Big-bank availability. Many large retail lenders limit HELOCs to primary residences. When they do lend against a second home, they usually want tax-return income, not deposits. That gap is why bank statement lines exist at all.

What Can Go Wrong After You Close?

A HELOC is not a safety net you can always count on. The regulator’s HELOC page says a lender may freeze or reduce a line if the home’s value drops significantly or your finances change. Because your pricing floats, your payment can move too. And the second home is the collateral, so falling behind puts that house at risk.

Plan for the draw-to-repayment shift. Interest-only payments end when the draw period ends, and the line then amortizes over the repayment period. Payments rise at that point even if pricing does not move. Run your cash flow against the repayment phase, not just the draw phase.

On the program that states a minimum later draw, Texas sets it at $4,000. Once the line is mostly drawn at closing, there is not much left to draw anyway.

When Does a DSCR Loan Beat a HELOC?

If the second home is really a rental, a DSCR cash-out refinance usually fits better. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.

A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. It replaces your first mortgage instead of sitting behind it. Lendmire’s complete DSCR loans guide walks through the mechanics.

Coverage numbers work like this. DSCR compares monthly rent to the full payment of principal, interest, taxes, insurance, and any HOA dues. Many select programs start at 1.00. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger ratios open better pricing and higher leverage.

Clearing 1.00 does not mean positive cash flow. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.

On most DSCR cash-out files, expect about 6 months of seasoning, credit around 660 (a 620 floor exists in parts of the network), and 700-plus for the strongest tiers. Reserves vary by lender, leverage, loan size, and transaction type. They commonly run around 6 months of PITIA, though some conservative files see them waived.

Choose the HELOC when you want to keep a first mortgage you like and your income is deposit-based. Choose DSCR when rent carries the property and you want to keep personal income out of the file. If business funds are part of your reserves, Lendmire’s article How to Use Business Funds for Reserves on a Second-Home Bank Statement Loan covers how that works.

One note on taxes. Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.

Key Terms Defined

CLTV (combined loan-to-value): Your first mortgage balance plus the new line, divided by the property’s value.

Draw period: The stretch when you can borrow from the line and pay interest only.

Homestead: Your primary residence, which Texas protects with its own equity-lending rules.

Non-homestead: Any Texas property that is not your primary residence, such as a second home or rental.

Bank statement documentation: Proving income through deposit history instead of traditional personal-income documentation.

DSCR: Debt service coverage ratio, the property’s monthly rent divided by its monthly payment.

Next Step

If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Lendmire is a broker arranging financing through select lenders in its wholesale network. HELOC availability covers 16 full-service states, Texas among them, a narrower reach than the 41-market DSCR footprint that includes Washington, D.C. You can reach the team at 828-256-2183.

Texas draws a hard line between the home you live in and every other property you own, and the investors who sort the two out first usually get the better structure.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges home equity lines of credit in its 16 full-service states through wholesale lenders, on primary residences, second homes and investment properties. Every line is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB: What is a Home Equity Line of Credit (HELOC)?

2. Texas A&M Real Estate Research Center: What to Know About Home Equity Loans in Texas

3. Texas Attorney General Opinion GA-0279