HELOC or Home Equity Loan Requirements for Home Improvements

The Quick Read: Qualifying comes down to four checks: how much equity remains after the first mortgage, the borrower’s credit score, debt-to-income ratio, and the property and title type, and in Lendmire’s wholesale network the ceiling depends heavily on whether the home is a primary residence, a second home, or an investment property. Everything below is subject to lender guidelines and full file review, and none of it is a commitment to lend.

• On an investment property, the network’s home equity line tops out at 70% combined loan-to-value (CLTV), with a 700 minimum credit score and a $500,000 maximum line.
• On a primary residence, the ceiling reaches 90% CLTV only at a 720 credit profile and only on lines up to $500,000.
• Debt-to-income (DTI) tops out at 50%, and the line is qualified on the interest-only payment at the maximum draw.
• An LLC cannot hold title on these lines, which is the sharpest difference from a DSCR loan.
• Many renovation plans on rentals fit a DSCR cash-out refinance better than a second-lien line.

What Lenders Check Before Approving a Line

Every home equity product asks the same four questions. How much is the property worth, how much is already owed, can the borrower carry the new payment, and is the property the kind the lender accepts?

Equity is measured as combined loan-to-value. Add the first mortgage balance to the new line, then divide by the appraised or automated value. The result must fit under the ceiling for the borrower’s credit tier and the occupancy type.

The borrower side is credit and DTI. Credit is pulled from a single-bureau score model keyed to the primary wage earner. The report can be no more than 90 days old at closing, and no rescores are allowed. The line is a personal-income product, so DTI matters in a way it does not on a DSCR loan.

Requirements by Occupancy

Occupancy sets the ceiling, so quote the figure for the property actually being borrowed against. The network’s tiers differ across three occupancy groups: primary residence, second home, and investment property.

On a primary residence, the 90% CLTV tier applies only at a 720 profile and only up to $500,000. At 720 and above, lines up to $750,000 cap at 75% CLTV. Scores of 660 to 700 reach 85% CLTV up to $500,000. A 640 score reaches 80% CLTV, and 620 and 600 step down to 70% and 60% CLTV on lines up to $400,000.

On a second home, 720 and above reaches 90% CLTV up to $500,000. Scores of 680 and 700 reach 85%, a 660 reaches 80%, and a 640 reaches 75%.

On an investment property, a 700 or 720 profile reaches 70% CLTV, and nothing sits above that. A line above $500,000 is available on a primary residence only. It requires a 700 credit profile or better (720 on the longer-runway program, described below), caps at 75% CLTV, and requires a full appraisal.

Line sizes start at $25,000, with a $10,000 floor in Michigan. Texas primary residences are homesteads and cap at 80% CLTV, so the higher tiers above never apply there.

How the Draw Works, and Why It Matters for Renovations

The network places a standalone line in first or second lien position. Two draw structures exist on primary residences and second homes. One runs a 3-year interest-only draw followed by a 17-year repayment period. The second is a 5-year interest-only draw followed by a 25-year fully amortizing repayment. Tennessee shortens both to 3 years and 12 years, and 5 years and 10 years. Investment lines use the 5-year structure only.

Here is the catch for renovation planning. Both programs require at least 75% of the line to be drawn at closing. The line is not a pay-as-you-go account that sits unused until the contractor invoices arrive. Pricing floats across both the draw and the repayment period on both programs and never converts to a fixed structure. After closing, the longer-runway program sets a $1,000 minimum for each later draw, or $4,000 in Texas; the higher-leverage program does not state a subsequent-draw minimum.

That matters when a project is phased. A borrower who needs only a fraction of the line at closing will pay interest on the full 75% from day one. Sizing the line to the project is part of the file, not an afterthought.

Credit, DTI, and Derogatory History

The program floor is a 600 credit score, but the floor moves up by occupancy. A second home starts at 640 and an investment property at 700. Tradeline and housing-history standards vary by program. The longer-runway program wants two tradelines seasoned 12 months or one seasoned 24. It also applies housing history of 0x30x6 and 1x30x12 at 640 and above, or 0x30x12 from 600 to 639, across all financed properties.

DTI runs to a 50% maximum. The cap drops to 45% for credit profiles from 600 to 679, and any ratio above 45% requires a 680 score. The payment used in the ratio is the interest-only payment on the maximum draw, not the payment after repayment begins. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.

A bankruptcy needs 4 years of seasoning from discharge or dismissal on both programs. Foreclosure-family history splits. 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. Investment files follow the 7-and-4-year path.

Valuation: Automated or Full Appraisal

Lines at or below $500,000 ordinarily run an automated valuation with no traditional appraisal. A higher CLTV may call for a secondary valuation, and a borrower may request a full appraisal in any case. Every line above $500,000 requires one.

The valuation measures the property as it stands. A renovation may support a higher appraised value, depending on comps and underwriter review, but a plan on paper does not raise the borrowing base. Borrowers who expect finished work to lift the value should ask for a full appraisal after the work, not count on it going in.

Property and Title Rules

Eligible property types are single-family, 2-4 units, PUDs, townhomes, and condominiums, including non-warrantable condos. The 2-4 unit category carries a 640 minimum on the longer-runway program. Modular factory-built homes are eligible on the longer-runway program only. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural-zoned properties are not eligible.

Title must be held by the individual borrower or an inter vivos revocable living trust, as fee simple or leasehold. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A rental already deeded to an LLC needs a vesting change before a line is possible, or a DSCR cash-out refinance instead, subject to program terms.

Exposure is capped as well. A borrower may hold up to three lines, with combined exposure of $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. Home equity lines are available only in Lendmire’s 16 full-service states (AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, WA), a narrower footprint than the DSCR program map.

Key Terms Defined

HELOC: An open-end line of credit secured by home equity that lets a borrower draw repeatedly up to a limit, as the CFPB explains.

Home equity loan: A closed-end second mortgage paid out as one lump sum, usually at a fixed rate.

CLTV: Combined loan-to-value, the first mortgage plus the new line divided by the property value.

Draw period: The stretch when the borrower can use the line. The CFPB notes it can last 10 years in a typical plan.

Repayment period: The stretch after the draw ends, when the balance amortizes. Plans often schedule full repayment over 10 or 20 years.

Interest-only draw: A draw period in which payments cover interest only, so the balance does not fall.

DSCR: Debt service coverage ratio, the property’s rent measured against its full monthly obligation of principal, interest, taxes, insurance, and any HOA dues.

HELOC Versus Home Equity Loan: What Actually Differs

Both products are second mortgages when a first mortgage is in place, as the CFPB comparison page states. A home equity loan is a lump sum. A home equity line of credit is revolving, and its payment varies with the balance.

The market-wide equity cushion is similar for both. Experian adds that lenders will likely require an appraisal to verify it. In the network, the ceilings are the occupancy tiers above, and the investment-property ceiling is 70% CLTV.

For a renovation with one fixed bid, a lump sum fits cleanly. For work that unfolds in stages, a line fits the cash-flow pattern, though the 75% draw requirement on the network’s lines narrows that advantage. Selling the home generally requires paying off the line in full, which matters for any flip or planned sale.

A Worked Example in Percentages

Take an illustrative case with modeled inputs, not market data. A borrower holds a primary residence with a first mortgage equal to 60% of value and a 720 credit profile. The 90% CLTV tier leaves room for a line of up to 30 points of value, up to $500,000, subject to the DTI test.

Now change one input. The same borrower sits at a 660 score. The ceiling drops to 85% CLTV, which leaves room for 25 points of value.

Move the same first mortgage to a rental. At a 700 or 720 profile the investment ceiling is 70% CLTV, so a first mortgage at 60% leaves room for 10 points of value. A first mortgage at 68% leaves 2 points, which is too thin for most renovation scopes. The same renovation on the same house can need a very different tool, depending only on occupancy.

Where the General Rule Breaks

The LLC problem. Investors who hold rentals in an LLC cannot use these lines at all. Title must sit with the individual or a revocable living trust, so the property has to be re-vested first.

Texas. A Texas primary residence is a homestead. It carries a 12-day waiting period, a one-lien-at-a-time rule, and 12-month seasoning, and all of those apply to primary residences only. Texas second homes and investment properties are eligible as non-homestead transactions. Texas properties are limited to 10 acres.

Listed properties. A property listed for sale, or listed within the past 60 days, is ineligible in Indiana, North Carolina, Pennsylvania, Tennessee, Texas, and Washington. New Mexico and Ohio apply a CLTV cap that depends on the credit profile.

Sub-640 profiles. They are limited to single-family residences with a clean 12-month housing history under the longer-runway program. The 2-4 unit category carries its own 640 minimum on that program, so a 2-4 unit property is out of reach below 640. Because second homes floor at 640 and investment at 700, the sub-640 restriction reaches primary residences only.

When a DSCR Cash-Out Fits the Renovation Better

A second-lien line sits behind the existing first mortgage and runs on the borrower’s personal profile. A DSCR cash-out refinance replaces the first lien and qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. DSCR loans are designed for non-owner-occupied investment properties, so they are reviewed differently from a standard owner-occupied mortgage.

The network’s cash-out parameters run in a different range from the line. Cash-out refinances top out around 75% LTV on a standard rental, with roughly 6 months of seasoning as the common expectation. Credit expectations vary by program. A 620 floor exists in parts of the network, most programs want around 660, and 700 and above unlocks the strongest leverage tiers. Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders), and above $2,500,000 the network generally holds to 30-year fixed structures. Reserves vary by lender, leverage, and loan size, and often sit near 6 months of PITIA. Extended terms and interest-only periods are available through select lenders.

Coverage works differently from DTI. A coverage ratio of 1.00 is where many select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the calculation.

The trade-offs run both ways. A DSCR cash-out resets the whole first lien, so the investor gives up the existing first mortgage. A second-lien line leaves it alone but caps at 70% CLTV and requires personal-income qualification. The complete DSCR loans guide covers the loan mechanics from the start.

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. The brokerage can also compare the line against a DSCR cash-out on the same rental. The illustrative calculator on this site gives a rough estimate only, and it is not a quote.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage broker that arranges DSCR investor loans through select lenders in its wholesale network, covering 40 states plus Washington, D.C. (41 markets total). It arranges home equity lines through select wholesale partners in 16 full-service states. Lendmire is a broker and not the lender, and every figure here is subject to lender guidelines and full file review. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB – What is a HELOC

2. CFPB – Difference between a home equity loan and a HELOC

3. Experian – Home equity loan vs. HELOC