Does Texas Law Restrict a Bank Statement HELOC on Your Home?

The Quick Read: Yes, but only when the collateral is your Texas homestead, meaning your primary residence. The limits come from the property and the type of lien, not from how you document income. Bank statement underwriting proves income. It does not exempt the loan from the state’s home equity rules, and it adds none of its own.

• A Texas homestead line caps at 80% combined loan-to-value, and your first mortgage counts toward that number.
• Each draw after closing must be at least $4,000, and a 12-day waiting period applies before a homestead loan can close.
• Only one home equity lien can sit on a homestead at a time, so a HELOC and a cash-out loan compete for the same slot.
• Rentals and second homes sit outside the homestead rules. Their leverage comes from program terms, and an investment line tops out at 70% CLTV.

Key Terms Defined

Bank statement HELOC: a home equity line of credit where the lender averages your qualifying deposits into a monthly income figure instead of relying on traditional personal-income documentation.

Homestead: the home you live in as your primary residence. In Texas, it gets special legal protection.

CLTV (combined loan-to-value): all the debt against the property, including your first mortgage, divided by its value.

Non-recourse: the lender can take the home if you default but cannot pursue your other assets.

DSCR (debt service coverage ratio): a rent-to-payment ratio. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.

What Does Texas Law Actually Restrict?

Texas regulates home equity lending in its constitution, not just in ordinary statutes. The rules attach to the homestead and to the type of loan. They never ask how you proved your income.

Here is what a homestead line has to satisfy, in plain terms:

• The 80% combined cap. The Texas Attorney General’s Opinion KP-0183 confirms that the aggregate principal of a home equity loan cannot exceed 80 percent of the homestead’s fair market value. If your first mortgage already uses 60% of value, the line has room for at most 20% of value.
• A $4,000 minimum per draw. The Texas Legislative Council’s HELOC fact sheet describes the $4,000 minimum advance. Small, casual draws are not allowed.
• Non-recourse structure. No other property can secure the loan, and guarantors and cosigners are generally off the table.
• A 12-day waiting period. The loan cannot close before the 12th day after the lender gives you written notice.
• One equity lien at a time. A new equity loan generally cannot close before the first anniversary of an earlier one on the same homestead.
• A fee cap. Loan-related fees are limited to 2% of the loan amount, and third-party items such as the appraisal, survey, and title insurance sit outside that cap. Alston & Bird reports that a later constitutional amendment lowered the cap from 3% to 2%.
• Spousal consent and a restricted signing location. Every owner and every owner’s spouse must consent to the lien, and the loan closes at an authorized location such as a title company or attorney’s office.
• No card access. You cannot draw with a credit card, debit card, or preprinted checks, and fees cannot be charged per advance.

A lender that breaks these rules and fails to cure the error faces serious penalties. That risk is a big reason some lenders skip Texas homesteads altogether.

Does Texas Law Restrict a Bank Statement HELOC on a Rental?

No. The Texas A&M Real Estate Research Center explains that these home equity loans cannot be taken on a second home or a rental or investment property. That means the homestead framework is not the vehicle for a rental. It does not mean Texas bans financing one.

A rental line is an ordinary non-homestead loan. The 80% combined cap, the 12-day wait, and the one-lien rule do not follow it. What follows it instead is the lender’s program terms.

Across the wholesale network Lendmire places files with, those program terms look like this. On a Texas primary residence, 80% combined is the ceiling, and the network’s tiers above that figure never apply. Second homes and investment properties follow their standard tables as non-homestead transactions. On an investment line, the ceiling is 70% CLTV with no tier above it.

Investment lines also run a 5-year interest-only draw followed by a 25-year fully amortizing repayment. Texas properties are limited to 10 acres, and a property listed for sale, or listed within the past 60 days, is ineligible.

Why Do Some Lenders Say No Anyway?

Many Texas homeowners hear “we don’t do that here” and assume the law forbids it. Often it does not. The law permits the loan with strict conditions, and some lenders decline to build a product around those conditions. That is lender policy, not legal prohibition.

Across our wholesale network, Texas primary-residence lines are available, with the state’s limits layered on top. That includes the 80% combined cap, the $4,000 minimum subsequent draw, the 12-day waiting period, and 12 months of seasoning between equity liens. Those last three bind primary residences only.

Programs differ from lender to lender, so a decline from one source tells you about that source’s appetite. It tells you little about whether the law blocks you.

How Does Bank Statement Income Fit Into the Texas Rules?

Bank statement underwriting answers one question: how much income do you earn? The Texas Constitution answers a different one: what kind of loan is on what kind of property? You need to pass both tests.

This matters most for self-employed owners. Heavy write-offs can leave tax-return income looking thin while deposits stay strong. Deposit-based underwriting addresses that gap. It does nothing to lift the 80% cap, shorten the waiting period, or allow a second equity lien.

Here is how the income side typically works across our network’s HELOC programs, subject to lender guidelines and full file review:

• Credit floor. The program floor is 600, and a single-bureau score is keyed to the primary wage earner.
• Business accounts need a stronger score. Business bank accounts require a 680 minimum for the deposit analysis. A 640 borrower can qualify for the line but cannot use business accounts.
• Debt-to-income. The maximum is 50%, or 45% for scores from 600 to 679. The calculation uses the interest-only payment on the maximum draw.
• Draw structure. At least 75% of the line is drawn at closing.
• Valuation. Lines at or below $500,000 ordinarily run an automated valuation. A full appraisal is required on every line above $500,000, and you can request one in any case.
• Title. Title must be held by you individually or by a revocable living trust. An LLC cannot hold title on a HELOC.

That last point is where many investors get tripped up. A rental already deeded to an LLC needs a vesting change before a HELOC can work, or a different product entirely.

Can You Have a HELOC and a Cash-Out Loan at the Same Time?

Not on one Texas homestead. Both are the same kind of home equity loan in the constitution’s eyes, so they compete for a single slot. Whichever you take first blocks the other for at least a year.

That makes the order of operations a real planning decision. Before you draw equity from your home, decide whether the equity should come from the homestead or from your rentals. Taking the homestead slot now can leave you without it when a better use shows up later.

Lendmire’s piece Can a Texas Second Home Have a Bank Statement HELOC and Cash-Out Loan? covers the non-homestead side of this question.

Did the 50% Rule Change?

Yes. Older Texas rules stopped HELOC advances once outstanding principal passed 50% of home value. A later constitutional amendment moved that limit to 80% of fair market value, and Alston & Bird’s summary of the amendments walks through the change.

The Texas Legislative Council fact sheet is an older document that still describes the 50% rule. Some current web pages repeat that stale number too. If you see 50% quoted as today’s limit, treat it as out of date.

The amendment also opened home equity loans to all agricultural homesteads, which used to be limited to dairy homesteads. Even so, the program parameters on our side rule out agricultural zoning, and Texas properties are limited to 10 acres.

What About Equity From a Rental Through DSCR?

If your goal is to pull cash from a rental, a DSCR cash-out refinance is the more natural tool, and it sidesteps the homestead rules entirely. 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.

Across most of our network, cash-out refinance tops out around 75% LTV on a standard rental, with about 6 months of seasoning as the common expectation. On short-term rentals, the cash-out ceiling is 70%. Most programs want a score around 660, and 700 or better unlocks the strongest leverage tiers.

Coverage matters too. A 1.00 ratio is where many select programs start, and stronger ratios open better terms and higher 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, because repairs, vacancy, management, and utilities sit outside the calculation.

Entities can often hold title on a DSCR loan, subject to lender program eligibility. That is the sharpest structural difference from a HELOC. For the full picture, see Lendmire’s complete DSCR loans guide.

Three Quick Scenarios

These use percentages only. Your numbers will differ, and every file is underwritten individually.

The self-employed homeowner. Picture a business owner with strong deposits and a first mortgage using about 55% of value. The 80% combined cap leaves room for a line of up to roughly 25% of value, before program tiers narrow it. If the deposits sit in a business account, a 680 score is needed for that analysis.

The homeowner with an existing equity lien. Say you took a cash-out loan on your homestead not long ago. A HELOC on that same home must wait until the first anniversary of that loan. You would either wait or look at other collateral.

The landlord with a paid-down rental. Consider an investor with a rental carrying modest debt. An investment HELOC would cap at 70% CLTV, while a DSCR cash-out can reach around 75% on a standard rental, subject to coverage and seasoning. Which fits depends on whether the investor wants a revolving line or a lump sum.

How Should You Prepare a Deposit-Based File?

Texas timing gives you room to get organized. These steps help:

• Keep business and personal deposits clearly separated, since the account type changes the minimum score.
• Document large or unusual deposits before the lender asks.
• Pull a credit report that will still be no more than 90 days old at closing.
• Confirm title and every spouse’s signature requirement early.
• Decide in advance whether the homestead lien slot is worth using.

Tax treatment can depend on how the funds are used and how the property is held. Keep clear records and speak with a qualified tax professional before relying on any deduction.

Next Steps

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’s piece on occupancy terms for a paid-off home in Texas is a good next read if you own your home free and clear. Lendmire brokers through select wholesale partners and is never the lender, and every figure here is subject to lender guidelines and full file review.

Texas draws a hard line around the homestead and almost none around the rentals you own, which is why the smartest equity plan starts by deciding which property should carry the debt.

About Lendmire

As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and real estate investors in its 16 full-service states open home equity lines of credit arranged through wholesale lenders. Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Texas Attorney General Opinion KP-0183

2. Texas Legislative Council HELOC fact sheet

3. Alston & Bird: Texas home equity loan amendments

4. Texas A&M Real Estate Research Center