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A home equity line of credit (HELOC) offers flexible access to funds, using your home as collateral. You might use a HELOC to cover home improvements, large planned expenses, or financial emergencies. But how long does it take to get a HELOC?

The typical HELOC processing time is usually anywhere from two to six weeks, though every borrower’s situation is different. If you’re interested in a HELOC, it’s helpful to know what kind of timing you can expect.

Understanding the HELOC Application Timeline

First, what is a home equity line of credit? A HELOC is a line of credit that’s secured by your home; that’s the standard HELOC definition.

Applying for a HELOC is a multi-step process, and some stages may take longer than others. Here’s an estimate of how long to get a HELOC from start to finish.

•   Research (1-3 hours). Before you apply for a HELOC, it’s helpful to spend some time comparing mortgage rates and terms from different lenders. Looking at three lenders at least can give you an idea of typical HELOC rates for people with your credit scores. You can also use a HELOC repayment calculator to estimate your monthly payments. Note: If you have an FHA loan, your current lender may not offer a HELOC, but you can get one through another lender.

•   Preapproval (<10 minutes). Mortgage preapproval means a lender performs a soft credit check to conditionally approve you for a HELOC. Preapproval doesn’t guarantee that you’ll get a home equity line of credit.

•   Application (<15 minutes). Many HELOC lenders offer online applications which may take just a few minutes to complete. Some offer initial approval in minutes.

•   Submit documents (<30 minutes). Your lender will likely ask for supporting documentation to go with your application. You may upload them when you submit your application or later on. If you don’t have financial details such as your current mortgage statement, latest tax filing, or pay stubs easily at hand, you’ll need to budget another hour or two to pull your documents together.

•   Appraisal (1 to 2 weeks). Your lender will need an appraisal to know what your home is worth. The appraisal itself should only take a few hours, but you might be waiting a couple weeks for the appraiser to finalize the report and submit it to the lender.

•   Underwriting (2 to 4 weeks). During underwriting, the lender reviews your financial details, the appraisal report, and information about your home to finalize your loan.

•   Closing (1 to 2 hours). If all goes well with underwriting, your lender will schedule a closing date. You’ll sign all the required paperwork, either online or in person, and pay your closing costs.

•   Funding (1 to 14 days). After closing, your lender will make your HELOC available to you. You may get a debit card, ATM card, or paper checks, which can take a couple of weeks to arrive by mail.

This isn’t an exact timeline, but it’s designed to give you an idea of how quickly each phase of the process may move.

Factors Influencing HELOC Approval Time

How long does it take to get a HELOC approved once you’ve submitted your application? You’ll usually need to wait a few weeks, though it may be a shorter or longer wait, depending on your situation and the lender you’re working with.

Lender’s Processing Speed

Every lender is different with regard to processing speeds, and it’s important to understand how lenders measure them. For example, a lender may tell you that you can get approved in five minutes but you’ll still need to go through income and credit verification, which takes time.

How long does a HELOC take at a traditional bank vs. an online lender? It depends, but traditional banks can sometimes move slower than online lenders if their process is more involved. Some online lenders guarantee funding access within five business days after closing.

Documentation Preparedness

The documents you’ll need to apply for a HELOC are the same documents your lender asked for when you bought the home. The list of documents you’ll need includes:

•   Pay stubs

•   W-2s

•   Tax returns

•   Bank account and/or investment account statements

•   Profit and loss statements and cash flow statements (if you’re self-employed)

How long it takes you to get these documents together ultimately hinges on your organizational skills. If you’ve got your documents prepared in advance, you won’t have to go hunting for them when you apply, which could slow the process down.

Property Appraisal

Lenders use an appraisal to estimate what your home is worth. That’s a requirement for any home loan. This is a nonnegotiable step for a HELOC, and how long it takes depends on your lender’s policies.

Some lenders offer what’s called a desktop appraisal, which is completed using property valuation software. An appraiser (or the lender) uses the software to pull data from public records and tax records to calculate an approximate value for the home.

Other lenders may require an in-person appraisal, which involves someone visiting your home to take pictures and measurements. A hybrid approach combines an in-person visit with valuation software. It may take a week for the appraisal to happen, and then you may be waiting another week or two for the appraisal report.

What if the appraisal comes in under your valuation expectations — how long does a home equity line of credit take then? There’s no set answer, since what happens next is usually up to you. You could ask the lender to reconsider the appraisal, or get a second opinion, which would involve scheduling another appraisal. Either option could add days or weeks to your HELOC timeline.

Underwriting Process

Underwriting is usually the most time-consuming step in the HELOC application process. This is when the lender will:

•   Review your application

•   Perform a credit check

•   Verify your income and employment

•   Review the appraisal report

•   Calculate your loan-to-value (LTV) ratio, which measures how much equity you have in your home

•   Calculate your debt-to-income (DTI) ratio, which measures how much of your monthly income goes to cover debt

•   Perform a title search to see if there are any liens or legal claims against the property

•   Request additional documentation from you or ask for clarification about information you’ve provided

•   Draw up the final loan documents and schedule a closing date

How long does it take to get HELOC approval once you reach this stage? If there are no issues with your application and the home appraises the way you expect it to, underwriting can move fairly quickly. Some lenders may be able to get you to a closing in as little as two weeks.

Steps to Expedite Your HELOC Application

If you need access to HELOC funds sooner rather than later, there are some things you can do to try and speed up the process. These tips can help you avoid snags that could eat up more time.

Gather Necessary Documentation in Advance

A little preparation can go a long way where your documents are concerned. Rounding up all of the documents the lender needs to process your application beforehand means you don’t have to waste time tracking them down later.

Check the lender’s requirements to see exactly what you’ll need before you start your application.

•   Ask your employer for copies of your pay stubs if you don’t have them.

•   Download a transcript of your most recent tax return from the IRS.

•   Download your bank statements and/or investment account statements from your bank or brokerage.

•   Use a spreadsheet to create a simple profit and loss statement if you’re self-employed.

Each of these tasks may take a little time, but once you’ve got it all together, you should be set for a smooth application experience. Read our detailed HELOC guide to learn more about how HELOCs work so you’re fully prepared.

Choose a Responsive Lender

One thing that can slow a HELOC application down every time is a lender that drags its feet. You can avoid that situation by researching lenders to see how quickly they return approval decisions, complete underwriting, and fund a HELOC once it’s approved.

Also, consider how responsive the lender is if you have questions. For instance, do you have multiple ways to contact the lender? Does it offer 24/7 phone or chat support? How long does it take a lender to get back to you if you have to leave a message?

All of those things can make a difference when it comes to how long it takes to get a HELOC.

Ensure Property Readiness for Appraisal

If your lender requires an in-person appraisal, make sure your home is ready in advance. You can do that by:

•   Cleaning and clearing away clutter

•   Touching up paint and tackling minor repairs if necessary

•   Sprucing up your curb appeal

It’s also helpful to make a list of all repairs or improvements you’ve made since you bought the home. If you’ve replaced your HVAC system or roof, for instance, that could have a significant impact on your home’s appraisal value.

The Takeaway

How long does it take to get a HELOC? In a perfect world, it’s a speedy process — but the reality is that HELOCs usually take at least a few weeks. If you know you’ll need a HELOC for future expenses, it’s important to get an early start on planning so you don’t have a long wait once you apply.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

What is the average time frame to get a HELOC?

An average time frame to get a HELOC is usually anywhere from two to six weeks. The actual timing will largely depend on your lender and whether any issues arrive during underwriting that could push back your closing date.

Can I speed up the HELOC approval process?

You can’t force a lender to move faster, but you can save time on your end by organizing your documents beforehand and making sure your home is appraisal-ready. Choosing a lender that offers fast approval and rapid funding can also make a difference.

Does the property appraisal affect the HELOC timeline?

The property appraisal affects your HELOC timeline, since you have to wait for it to be completed, then wait for the lender to receive the final appraisal report. If the lender uses a desk appraisal (where no in-person visit is needed), it may go a little faster. An in-person appraisal, on the other hand, could take one to two weeks to complete.

What documents are typically required for a HELOC application?

Lenders usually ask for documents that show proof of income and assets. So you may need to provide copies of recent pay stubs, W-2s, tax returns, and bank statements. If you’re self-employed, you can substitute a profit and loss statement and cash flow statement for W-2s.

Does my credit score impact the HELOC approval time?

A good credit score could potentially help you get approved for a HELOC faster, though the lender will still need to verify your income and review the appraisal. “Good” credit is a FICO® score ranging from 670 to 739.

Photo credit: iStock/miniseries

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q125-071

A home equity loan, or HELOC, is a revolving line of credit that’s secured by your home. You can use a HELOC to access the equity you have in your home, which is the difference between what you owe on your home and what it’s worth.

It’s possible to get a HELOC on an investment property if you meet a lender’s requirements. There are both pros and cons to using a home equity line of credit on an investment property, which is important to understand before moving forward.

Understanding HELOCs for Investment Properties

An investment property HELOC is a home equity line of credit that’s secured by an investment property that generates income. This might be a home that you exclusively rent out full-time or one that you rent seasonally.

Typically, when someone gets a HELOC, they borrow against their primary residence (the home they live in). Your home secures the HELOC, and the amount you can borrow is based on your credit scores and the amount of equity you have.

An investment property equity line of credit works much the same way, but the difference is that it’s tied to your rental home. You might tap into your investment property equity using a HELOC to:

•   Fund renovations or repairs on the property

•   Consolidate high-interest debts

•   Pay for a large expense

•   Cover a financial emergency

Investment property HELOCs, like HELOCs generally, have a draw period of 5 to 10 years, in which you can access your credit line. This is followed by a repayment period that may last 5 to 25 years.

Recommended: HELOC Definition

Eligibility Criteria for Investment Property HELOCs

Qualifying for a HELOC on a primary residence usually isn’t that different from getting a home loan to buy property. Getting a HELOC for investment property, however, may entail jumping through a few additional hoops.

Equity Requirements

The first requirement for a home equity loan or HELOC on investment property is equity. (Again, equity is the difference between what you owe on the home and what it’s worth.) Lenders use something called the loan-to-value (LTV) ratio to measure your home equity. Your LTV ratio is the amount you’re financing compared to what your home is worth.

Typically, lenders look for an LTV ratio of 85% to 90% if you’re getting a HELOC on a primary residence. So you’d need 10% to 15% equity to qualify.

The required LTV for a HELOC on investment properties, on the other hand, might be 75% or 80% instead. Essentially, you’d need more equity to qualify.

Why? Because it’s a riskier loan for the lender. If you were to experience financial hardship, you would likely want to preserve the home you live in and would prioritize payments on that mortgage above those on your investment property.

A HELOC on rental property, like any HELOC, is a junior lien — which means that it takes a backseat to first mortgage liens for repayment. So if you did lose your investment property to foreclosure, your first mortgage on the property would get paid off from the proceeds of the sale before a HELOC lender would be paid. Read our detailed HELOC loan guide to learn more about this borrowing option.

Credit Score Standards

A credit check is typical for a home equity line of credit. For most mortgages, including HELOCs, lenders look for a FICO® credit score of 620 or higher. (FHA loans accept borrowers with scores as low as 500.)

Credit score requirements may be higher for HELOCs, however, since there’s more risk for the lender. So you may need a score of 670 or better to qualify. That’s a “good” credit score, according to FICO.

If your credit could use some improvement, focus on paying bills on time and reducing your overall debt levels. You could also improve your credit utilization by requesting higher limits for your credit cards. Just don’t run up more debt against your new limit.

Property Type and Condition

Aside from your finances, lenders also scrutinize the property when deciding whether to approve a HELOC on an investment property. An in-person appraisal may be required to assess its condition and make sure that it’s an eligible property type.

Since the home secures your HELOC, the lender will want to make sure that it’s accurately valued and in good shape. The lender may also ask questions about your tenants and leasing agreement to assess how consistent your rental income is.

Pros and Cons of Using a HELOC on an Investment Property

Should you get a HELOC for an investment property? There are some compelling reasons to consider it, but there are downsides as well. It’s important to weigh both sides before making a decision.

Advantages

Here’s what a HELOC on a rental property has to offer, in terms of benefits.

•   Convenience. A HELOC offers flexible access to cash for home improvements, emergencies, or any other reason.

•   Low rates. HELOCs may be less expensive than other borrowing options, such as personal loans or credit cards.

•   Possible tax deduction. You can deduct the interest you pay if you’re using a HELOC exclusively to renovate or repair your investment property.8 This rule may change after the 2025 tax year; consult a tax advisor about all deductions.

•   Lower payments initially. You may only have to make interest payments in the draw period.

•   Less risk. If you experience a significant financial setback and default on the line of credit, at least you aren’t risking your primary residence.

Disadvantages

Getting a HELOC on investment property isn’t always the right move. Here are some downsides of an equity line on investment property to consider.

•   Difficult to qualify. Not all lenders offer HELOCs for rental properties and it may be challenging to find one that will approve you.

•   Unpredictability. If you have a variable-rate HELOC, your interest rate is subject to change, which could make your payments less affordable if rates rise.

•   Cost. Lenders may charge higher interest rates or higher fees for HELOCs on investment property, adding to your overall cost.

•   Shrinking equity. Taking out a HELOC reduces your available equity, which could put you at risk of becoming upside down if home values decline.

•   Less flexibility. Any balance owed on a HELOC often needs to be paid when you sell the house. This might affect how quickly you can sell your investment property should you wish to do so.

Alternative Financing Options

A HELOC isn’t the only way to get cash when you need it. You might consider other possibilities, including:

•   HELOC on your primary home. If you can’t get a HELOC on an investment property, you may still qualify for one on the home you live in. Shopping around to compare mortgage rates can help you see what you might qualify for.

•   Personal loans. Personal loans let you borrow a lump sum of money, and unlike a HELOC, they aren’t tied to your home.

•   Credit cards. Credit cards could be a good alternative to a HELOC if your card has a low rate or you’re earning generous rewards when you spend. For instance, you might use a card that earns cash back at home improvement stores to save money on remodeling projects.

•   Cash-out refi. A cash-out refinance replaces your existing mortgage loan with a new one. You take your equity out in cash at closing. This could be a simpler way to get access to funds and potentially lower your rate and/or monthly payments.

Recommended: Mortgage Preapproval

Steps to Obtain a HELOC on an Investment Property

Getting a HELOC on a rental property takes some planning. Here’s what you’ll need to do.

Assess Your Financial Situation

First, look at where you are financially. Consider your:

•   Credit scores

•   Income

•   Existing debt (including mortgage payments for your primary residence, rental property, and credit cards)

•   Budget and expenses

•   Home equity

•   Borrowing needs

You can use a home equity calculator to gauge whether you have the right LTV required to get a HELOC on an investment home. A HELOC repayment calculator can help you estimate how much of your budget might go to payments. If you haven’t checked your credit, you can pull your reports for free through AnnualCreditReport.com or with free credit monitoring.

Prepare Necessary Documentation

If you think a HELOC is the right move, the next step is organizing your documents. Generally, you’ll need to have copies of your:

•   Pay stubs

•   W-2s

•   Tax returns for the most recent year

•   Bank account statements

If you’re self-employed, your lender might ask for a profit and loss statement and cash flow statement. You may also need to provide two years’ worth of tax and income statements versus one.

Submit Your Application

Assuming you’ve chosen a lender, the next step is applying. If you’re applying for a HELOC online, you should be able to upload any supporting documentation the lender requests.

As you go through the application, complete all required fields and double-check for accuracy. Once you submit your application, the lender will take the next steps which are checking your credit and scheduling an appraisal.

You’ll need to pay the appraisal fee, along with any other closing costs. The appraisal fee is usually due upfront, while other fees can be paid on closing.

The Takeaway

Getting a HELOC on an investment property can unlock extra cash, but it may not be suitable for every situation. Before you move forward with a home equity line of credit, it’s important to know what you can expect and how a HELOC tied to an investment property is different from one tied to your primary home.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

What are the typical interest rates for HELOCs on investment properties?

HELOCs on investment properties tend to have higher interest rates than HELOCs on primary residences, or mortgages used to buy a home. You may pay several percentage points more to borrow, and it’s entirely possible to see double-digit HELOC rates.

Are there tax implications when using a HELOC on an investment property?

You might be able to deduct the interest you pay on a HELOC for your rental property if you’re using the money for repairs or improvements. You’ll need to consult a tax advisor, however, and be mindful that this rule may change after the 2025 tax year.

How does a HELOC on an investment property affect my credit score?

HELOCs show up on a credit report. When you apply for a HELOC, it adds an inquiry to your report, which can knock a few points off your score. As long as you pay your HELOC on time, however, you can get those points back.

Can I use a HELOC from my primary residence to fund an investment property?

You can use a HELOC from your primary residence to fund an investment property, but it isn’t always easy. Lenders may be more stringent with credit, income, and equity requirements when you borrow against your primary home to buy a rental home.

What are the risks associated with taking a HELOC on an investment property?

The primary risk associated with getting a HELOC on an investment property is losing the home to foreclosure. If you can’t manage the added debt load or your rental income dries up, you could risk the loss of the property if the bank takes it back.

Photo credit: iStock/gorodenkoff

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q125-070

You may have grown up calling manufactured homes mobile homes — and the two terms are sometimes still used interchangeably — but these dwellings have evolved.

They’re more customizable and arguably fancier than previous iterations. Still, it’s a good idea to look beyond the sticker price.

Characteristics of a Manufactured Home

First, to clarify a popular point of confusion, modular homes and manufactured homes are different types of houses.

Both are built partially or entirely in a factory, but modular homes — aka kit homes — must adhere to the same codes that site-built homes do.

Manufactured homes are intended to be permanent dwelling units. Starting in 1976, they began to be built to a code developed by the Department of Housing and Urban Development (HUD) and moved past the name “mobile homes” and the notion of trailers placed atop blocks.

The manufactured home, built on a permanent chassis, is tested to ensure that it can be transported properly before being attached to a foundation, or the underlying chassis may be “skirted” by blocks or siding.

The home may be movable, depending on its age and condition, but few are moved. Moving a manufactured home, if it is new enough to be moved, can cost $20,000 or more.

Pros and Cons of a Manufactured Home

Before buying a manufactured home, the housing choice of about 20 million Americans, take a look at the following advantages and disadvantages to help you in your decision-making.

Pros

•   Cost effective: According to the Joint Center for Housing Studies of Harvard University, manufactured homes cost around 20% to 45% less than comparable site-built homes, excluding the price of land.

•   High quality: Manufactured homes must adhere to the HUD code, which applies to the home’s design, construction, durability, transportability, strength, and energy efficiency. Factories also need to adhere to standards and must inspect each step during construction.

•   Few delays: Because manufactured homes are built indoors in a controlled environment, the weather won’t interfere with the timeline to construct the home.

•   Home warranties: Most manufactured homes have some form of warranty to guarantee the quality of the home, usually for one to five years. The seller has its own warranties for transporting and installing the home.

•   Customizable: Most manufactured home makers allow homebuyers to customize some aspects of the home, such as certain finishes, porches, vaulted ceilings, and fireplaces.
Energy efficient: The HUD code ensures that manufactured homes have a high degree of energy efficiency.

•   Financing: The financing options include loans even if the buyer will not own the land the home will rest on.

•   Appreciation: Manufactured homes may not appreciate at the same rate as other types of homes and may even depreciate. The resale value depends on the location, and the age and condition of the home.

Cons

•   Limited customization: You can customize some parts of a manufactured home, but you may not have the options you want, depending on the builder.

•   Price increases: The average sales price of a manufactured home increased nearly 50% during the pandemic, driven by the demand for affordable housing.

•   Lot rent: Most residents own their homes but rent the land. Those who lease lots face uncertain increases in monthly costs. Park rents have been doubling and tripling.
Financing options may carry higher rates. Whether the home is considered real property or personal property makes a big difference.

A manufactured home built on or after June 15, 1976, and considered real property might qualify for a conventional or government-backed loan. To be considered real property, the home must be at least 400 square feet, permanently attached to a foundation, and on land that you own or plan to buy. The loans usually carry slightly higher interest rates than mortgages for traditional homes.

Financing options for manufactured homes classified as personal property include chattel loans, which come with a higher interest rate and a shorter term than most traditional mortgages. (A chattel mortgage also may be used for tiny house financing.)

FHA Title I loans and personal loans are other options for manufactured homes classified as personal property. Rates for unsecured personal loans will be higher than rates for secured loans like mortgages or chattel loans.

Finding a Manufactured Home

Most manufactured homes are sold through retailers instead of the builders. It’s also possible to purchase manufactured homes through real estate agents and online manufactured home marketplaces.

Think of buying a new manufactured home like going to a store where you can view model homes. You’ll be able to see your options, such as the number of bedrooms, layout, and customizable features. Depending on the retailer, you may even be able to apply for financing and arrange for delivery all in the same day.

Before signing on the dotted line, make sure you read the fine print, such as what warranties come with the home. You may be able to purchase both the land and home through a manufactured home community.

Who Should Get a Manufactured Home?

A manufactured home may be a good fit for a retiree or a first-time homebuyer who is looking for a more cost-effective housing solution than a condo or single-family home — especially if they own the land underneath them.

It also may be suited for those who want a new construction home and to be able to customize parts of the structure.

The Takeaway

A manufactured home may be a good choice for some buyers, and others may want to try to buy a condo, townhouse, or single-family home.

If you’re in the latter group or buying investment property, SoFi can help you get started by providing a rate quote with no obligation.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What are the advantages of manufactured homes?

The main advantages of manufactured homes are the relatively low cost and the building standards they must meet.

Is a manufactured home considered real property?

A manufactured home is considered real property if you own both the land and the home, and the structure is permanently attached to a foundation.

Can I get a loan to buy a manufactured house?

Yes, though the type usually depends on whether the home is considered real or personal property. Classification as personal property is almost certain to preclude conventional financing. A borrower need not own the land for an FHA Title I loan from an approved lender. The loan may be used to buy a manufactured home, a lot on which to place the home, or a manufactured home and lot in combination. There are maximum loan amounts and terms.

Are manufactured homes safe?

Yes. Manufactured homes built after mid-1976 abide by HUD standards, and the agency significantly updated its manufacturing and safety standards in 2024. Most come with warranties.

Photo credit: iStock/clubfoto

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q125-037

When comparing different types of mortgages, there are some great reasons to consider a loan from the U.S. Department of Veterans Affairs (VA) if you’re eligible for one. Some of the best VA loan benefits include no down payment requirement, no private mortgage insurance, and the potential to get a lower interest rate.

There are, however, some advantages to getting a conventional loan instead even if you qualify for VA financing. Comparing the benefits of a VA loan vs. a conventional mortgage can help you decide which one might be right for you.

Comparing VA Loans vs. Conventional Loans

If you’re a first-time homebuyer, it’s good to know a little about different types of mortgages and how they work. VA loans and conventional loans can both help you to buy a home, but one might be a better fit than another, depending on your financial situation.

Conventional Loan

A conventional loan is a home mortgage loan that’s not backed by the federal government. Examples of government-backed loans include VA loans and Federal Housing Administration (FHA) loans, which are designed to make buying a home more affordable for first-time buyers. Conventional loans can be conforming, meaning they meet standards set by government entities Fannie Mae or Freddie Mac, or non-conforming.

Conventional loans might be what you automatically think of when discussing mortgage loans. You can get a conventional mortgage from a traditional bank or credit union, but you can also find them offered through online lenders. Conventional mortgages typically require a down payment, which is money you pay upfront to reduce the amount you need to borrow.

VA Loan

What is a VA loan? A VA loan is a loan that’s backed by the federal government. The Department of Veterans Affairs operates the VA loan program to help eligible military members and their surviving spouses purchase affordable housing. Borrowers can get a loan through an approved VA lender to buy a home, build a home, or pursue a mortgage refinance.

If a borrower defaults on a VA loan, the government steps in to help the lender recover some of its losses. This is one of several VA loan benefits. With a conventional loan, the lender can’t call on the government to get any of its money back if the borrower fails to pay what’s owed.

Mortgage Requirements for VA Loans vs Conventional Loans

What are the benefits of a VA loan vs. conventional loan? A lot of the main advantages center around what’s needed to qualify and what you’ll pay as a borrower. Here are some of the main mortgage requirements to know when looking at the benefits of VA loan financing side by side with conventional loans.

Credit Score

Lenders can use your credit score to qualify you for a mortgage and your credit history can also influence the rates you pay for a home loan. One of the main benefits of using a VA loan to buy is that the VA program does not have a minimum credit score requirement. That could make a VA loan attractive for borrowers with less-than-perfect credit.

However, VA-approved lenders may set their own minimum credit score requirements for loans. Of course, lenders can do the same for conventional mortgages. Generally speaking, a good credit score for a mortgage is usually 620 or higher, though the better your score the easier it may be to get approved.

Down Payment

Putting money down on a home reduces the amount you need to borrow and if you’re getting a conventional loan, it may help you to avoid private mortgage insurance (PMI). PMI is insurance that covers the lender in the event that you default on your loan and it’s typically required for conventional loans when you put less than 20% down.

The VA, however, doesn’t require a down payment for loans. That’s one of the nicer VA loan benefits for homebuyers, since you don’t have to part with a large chunk of cash all at once. Instead, you could save your money to buy new furniture, make improvements to your new home, or pad your emergency fund so that you’re prepared in case the roof springs a leak or you need to replace your water heater.

Debt-to-Income Ratio

Your debt-to-income ratio or DTI reflects the amount of your income that goes to debt repayment each month. For conventional home mortgage loans, a good DTI is 36% or less, though it’s possible to find lenders that will work with you if your DTI is above that amount.

With VA loans, it’s possible to get approved with a DTI of up to 41%. However, having a higher DTI could make it more difficult to keep up with your mortgage payments. For that reason, it’s a good idea to work out a detailed home buying budget to determine how much you can afford without straining yourself financially.

Private Mortgage Insurance

As mentioned, private mortgage insurance is a feature that can be included in a conventional mortgage if you put less than 20% down. Premiums are added into your monthly mortgage payment and once your equity reaches 20%, you can request to have PMI removed from your loan. Lenders are supposed to drop PMI automatically once your mortgage balance reaches 78% of the home’s original value, assuming you are up to date on your payments.

One of the benefits of a VA home loan is that you don’t have to worry about any of that. There is no PMI for these loans, so you don’t have to factor in any added costs when estimating how much your monthly mortgage payments will be.

Property Eligibility

VA home loans can be used to purchase a variety of home types, including:

•   Single family homes with up to four units

•   Condos in a VA-approved project

•   Manufactured homes

The VA loan program requires a home inspection and an appraisal to make sure that the home is structurally sound and that its value is compatible with the amount that you want to borrow. If a home has any obvious defects, such as a cracked foundation, you may need to get an additional inspection from a certified engineer in order to move ahead with the loan.

VA loans are designed for purchasing primary homes. In other words, you can only get one for a home you plan to live in. Conventional loans, on the other hand, can be used to purchase a primary home, second home, or investment property. While an appraisal is required for a conventional loan, an inspection may be optional if the lender allows.

Borrower Fees

When you get a conventional loan, you’ll typically pay 2% to 5% of the purchase price in closing costs. Closing costs cover things like attorney’s fees, mailing fees, and recording fees. You’ll need to bring a check to closing or wire the amount to your closing attorney to pay those fees, along with your down payment.

A VA lender can also charge closing costs and borrowers must usually pay a VA funding fee as well. This fee is used to cover the costs of the VA loan program and it’s paid just once. The amount you pay for a VA loan funding fee depends on whether you’re a first time homebuyer or repeat buyer and how much money you put down, if any.

Additional Requirements to Consider

Aside from having a good credit score and steady income, there’s one more thing you’ll need to qualify for a VA loan. Borrowers are expected to produce a Certificate of Eligibility (COE) demonstrating that they’re eligible for the VA loan program.

Veterans, service members and surviving spouses can apply for a COE online through the VA website. To get your COE, you must be able to meet minimum duty and service standards. If you’re currently on active duty, you’ll need to get a statement of service from your commander, adjutant, or personnel officer.

If you don’t meet the service requirements for a COE, you may still be able to qualify if you were discharged. Exceptions are also made for the spouses of veterans and for people who served in certain organizations. However, if you’re not able to meet those requirements then you’ll need to consider another home loan option.

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Pros and Cons of a VA Loan vs a Conventional Loan

The benefits of a VA mortgage loan are undeniable, particularly for first-time buyers who may not have a lot of cash to put toward a down payment. To recap, here are the main VA home loan benefits to know, as well as some of the cons, when comparing them to conventional financing options.

How to Choose the Right Mortgage For You

Weighing the benefits of VA loan financing against conventional loans is important when it comes to choosing the best loan option. If you meet the criteria for a VA loan, then you might consider prequalifying for this type of mortgage first to see what kind of rates and terms you’re eligible for.

On the other hand, if you’re ineligible for a VA loan because you don’t have a COE or you can’t meet a lender’s credit requirements, then a conventional loan might be best. Visit a home loan help center to explore more options.

With any mortgage, it’s helpful to consider:

•   Interest rates and what you might pay

•   Repayment terms

•   Closing costs and other fees

•   Appraisal and inspection requirements

•   Down payment requirements

•   Funding speed

It’s also to your advantage to make yourself as creditworthy as possible before applying for a home loan. Some of the best tips to qualify for a mortgage include paying down existing debts to reduce your debt-to-income ratio, making sure you’re paying all your bills on time, and holding off on applying for other loans or lines of credit.

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The Takeaway

There are several VA home loan benefits. Getting a VA loan could save money if you’re able to get a lower interest rate and avoid making a large down payment. Conventional loans, on the other hand, are still worth a look, especially if you want to buy a second home or an investment property.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What is the advantage of a VA loan vs a conventional loan?

VA loans do not require a down payment or private mortgage insurance. Conventional loans may require a 20% down payment to avoid PMI. VA loans may also have lower interest rates for qualified borrowers.

Are VA rates better than conventional?

VA loans can have lower interest rates than conventional loans, which could save you some money as a homebuyer. The interest rates you’re able to qualify for with a VA loan vs. conventional loan can depend largely on your credit scores and credit history.

Why do sellers prefer conventional over VA?

Home sellers may prefer to sell to buyers who have conventional loan funding simply because VA loans tend to have stricter requirements when it comes to the property itself. Buyers must be able to get the home appraised and inspected in order to move ahead with a VA purchase loan.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Can you refinance a HELOC (home equity line of credit)? Yes — in many different ways, in fact. And if your current HELOC’s draw period is coming to a close, leaving you staring down the barrel of the higher-cost repayment period, this may be a good time to learn more about them.

Below, we’ll walk through the various options you have for refinancing a HELOC. Knowing your way around these financial products can help you put the value of your home to work for you — and even, when done correctly, increase your equity.

Let’s take a closer look.

Understanding HELOC Refinancing

First, a quick refresher: A home equity line of credit is a revolving credit line that allows you to borrow money against the equity you’ve built in your home. HELOCs are split into two distinct time frames: a draw period (usually 10 years) and a repayment period (which can last as long as 20).

As its name implies, the draw period is the time during which you can “draw” from the HELOC’s available credit. Many homeowners use a HELOC to fund major home renovation projects that can actually increase their equity in the long term. However, during the draw period, you only have to pay interest, not principal, which means that HELOCs tend to have lower payments during this time frame and higher payments during the repayment period. (New to HELOCs? Learn how HELOCs work before signing on to one.)

Reasons to Consider Refinancing Your HELOC

Many borrowers are drawn to a HELOC refinance when their draw period is coming to an end. That’s because the repayment period, which requires the repayment of both principal and interest, tends to have much higher monthly costs than the draw period — which can be a budgetary stretch for borrowers.

However, there are other worthwhile reasons to consider refinancing a HELOC at any part of its lifecycle, such as:

•   Scoring a lower interest rate, especially if your credit score or other factors have substantially improved

•   Moving from a variable interest rate to a fixed one, which can help make costs more predictable

•   Avoiding balloon payments that are written into some HELOCs, which can require the entire balance to be paid in one lump sum

Just like refinancing any other kind of loan, refinancing your HELOC can help you lower costs in the short term (with lower monthly payments) or long term (with lower interest rates), depending on your financial needs.

Next, we’ll walk you through how to go about doing it.

Steps to Refinance Your HELOC

Let’s start with two of the most straightforward ways to refinance your HELOC: loan modification and getting a new HELOC.

Call Your Lender and Ask About Loan Modification Options

Perhaps the easiest way to “refinance” your HELOC is not to refinance it at all, but rather to contact your current lender to learn what HELOC modification options are available.

Your loan servicer may be able to lower your interest rate or extend the term, both of which can make your monthly payments more manageable. Plus, you won’t have to go through the hassle and paperwork of taking out a new loan with a different financial institution. Most lenders require those seeking loan modification to show proof of financial hardship, although it never hurts to ask even if you don’t meet this qualification.

Shop Around for a New HELOC

Of course, your original lender can always say “no” to a HELOC refinance — and if it does, another option is to take out another HELOC and use it to repay your existing one. This method allows you to extend the draw period, which is helpful for those who are still actively using the line of credit they took out against their home’s value, while also keeping your monthly payments lower for longer.

However, if you’re nearing retirement age or aren’t expecting a major budgetary change that’ll make the higher repayment-period bills any more feasible, you might consider an alternative to refinancing. We’ll go through a few of your best options in just a moment.

Evaluating Your Current HELOC Terms

To ascertain if any refinance is worthwhile, you first need to understand your current HELOC’s terms. That way, you’ll understand how much you stand to pay over time under your current loan’s contract versus how much you might save (or lose) by changing it.

Along with your interest rate, you should also know whether that rate is fixed (unchanging) or variable (liable to change with market conditions). While variable interest rates offer the potential of lower payments if market rates drop, they can also be less predictable than fixed-rate loans.

HELOCs can also have annual fees that will add to your debt total over time. If you’re refinancing to a new HELOC, be sure you understand not just ongoing fees but any origination fees that may add to the overall expense of the transition.

Finally, keep in mind that lengthening your loan’s term may lower your monthly payments, but will almost certainly mean you’ll pay more in interest over time.

Alternatives to HELOC Refinancing

If modifying your current HELOC or taking out a new one won’t work for you — or if you’re simply evaluating all of your options before making a decision — here are some alternatives to HELOC refinancing to consider.

Consider a Home Equity Loan

As you compare a home equity loan vs. a HELOC, you’ll see that both use the equity you’ve built in your property as collateral. A home equity loan is also sometimes known as a “second mortgage,” but technically a HELOC is also a second lien on your home.

Home equity loans offer the stability of a predictable monthly payment at (usually) a fixed interest rate, and because they’re also secured by your equity, they tend to have lower interest rates than unsecured personal loans. However, like HELOCs, they can have upfront origination fees — potentially ones as high as the closing costs you paid when you purchased your home in the first place.

Look Into Cash-Out Refinancing

Cash-out refinancing involves refinancing your original mortgage for a larger sum than you currently owe on that loan. The new cash-out refinancing loan would be large enough to cover whatever you owe on your home and allow you to pay off your HELOC, leaving you with one payment instead of two.

Of course, taking out such a large loan — which may have its own 30-year term — can leave you making mortgage payments for a much longer time and spending more on interest in the long run. Additionally, these loans, too, come with closing costs that can total thousands of dollars.

Look Into Cash-Out Refinancing

Cash-out refinancing involves refinancing your original mortgage for a larger sum than you currently owe on that loan. The new cash-out refinancing loan would be large enough to cover whatever you owe on your home and allow you to pay off your HELOC, leaving you with one payment instead of two.

Of course, taking out such a large loan — which may have its own 30-year term — can leave you making mortgage payments for a much longer time and spending more on interest in the long run. Additionally, these loans, too, come with closing costs that can total thousands of dollars.

Consolidate Your HELOC with Other Debts Using a Personal Loan

Finally, you could also consider using a personal loan to pay off your HELOC along with other debts you may have, such as credit card debt. Using this tactic, you’d take out a personal loan large enough to cover all of your debts, use the funds to pay them off, and then make one monthly payment rather than many.

Personal loans are easy to apply for, flexible, and you can use the money for just about anything — including taking out more than you need to pay off debts, if you have other short-term financial needs. However, they also tend to have higher interest rates and stricter eligibility requirements than other loan types since they’re not secured by collateral.

Potential Pitfalls and How to Avoid Them

While refinancing your HELOC can be a smart money move, there are some common pitfalls worth avoiding, including:

•   Not running the numbers. The only way to truly know if refinancing your HELOC is worthwhile is to run the numbers to understand how much you’ll pay, in both the short and long terms, with either loan. A HELOC payment calculator can help.

•   Not understanding how HELOCs can affect your taxes. Depending on when you took out your HELOC and how much mortgage debt you have, its interest may be tax deductible — savings you won’t want to miss out on.

•   Not using a HELOC to build wealth. If you’re going to borrow money, you might as well put that debt to work for you in the long run. That’s why the funds from HELOCs are best used for projects like home renovations and repairs, that can increase your equity over time.

The Takeaway

Can you refinance a HELOC? Yes — and doing so can help keep you out of hot water if you’re facing down payments you don’t have the budget for. That said, like any refinance, this process can also mean paying more for the loan over the long term. Consider a cash-out refinance or a home equity loan if you’re looking for options to refinance a HELOC.

SoFi now offers home equity loans. Access up to 85%, or $350,000, of your home’s equity. Enjoy lower interest rates than most other types of loans. Cover big purchases, fund home renovations, or consolidate high-interest debt. You can complete an application in minutes.

FAQ

When is the best time to refinance a HELOC?

Many borrowers opt to refinance a HELOC as their draw period comes to a close and monthly payments increase. That said, refinancing after a significant drop in interest rates or an improvement in your personal financial situation could stand to save you money on the loan overall.

Can I refinance a HELOC with bad credit?

While lenders will likely look at your credit score during the HELOC refinancing process, it’s not the only factor they’ll consider. It may be more challenging to find a lender who will work with you if your score is less than 620, but if you shop around, work on taking good care of your credit score, and keep your other financial factors (like your overall debt level) in good shape, you can increase your odds of qualifying.

How much does it cost to refinance a HELOC?

Just like your original mortgage and HELOC, refinancing a HELOC can come with closing costs of between 2% and 5% of the total loan cost, which can be thousands of dollars. That’s one reason to make sure you understand ahead of time how much you really stand to save by refinancing — and if it’s worth it.

Photo credit: iStock/Miljan Živković

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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