How to Shop for a HELOC (Step-by-Step Guide)

Shopping for a HELOC isn't like buying a TV where you find the lowest price and click "buy."

Get it wrong and you'll pay thousands more over the life of your loan. Get it right and you'll have a flexible credit line at a rate that actually makes sense.

Here's how to shop smart.

Step 1: Know Your Numbers First

Before you contact a single lender, gather these numbers:

Your Home

• Estimated home value (Zillow/Redfin estimate is fine for now)
• Current mortgage balance (check your statement)
• Equity calculation: Value minus balance = equity

Your Finances

• Credit score (get your free score from Credit Karma or your bank)
• Monthly gross income (before taxes)
• Monthly debt payments (mortgage, car, cards, student loans)
• Debt-to-income ratio: Debts ÷ income (lenders want under 43%)

Example:

• Home value: $500,000
• Mortgage balance: $300,000
• Equity: $200,000
• Max HELOC at 80% CLTV: $100,000

Now you know what you're working with.

Step 2: Check 3-5 Lenders (Minimum)

One quote isn't shopping. You need 3-5 to understand your options.

Where to get quotes:

Credit Unions (often lowest rates)

• Check your local CU
• Bethpage FCU (open to anyone)
• PenFed (broad eligibility)
• Navy Federal (military)

Online Lenders (fastest approval)

• Figure
• Achieve Loans
• SoFi

Banks (large amounts, relationship discounts)

• Your current bank
• US Bank, Wells Fargo, Chase

Marketplace (see multiple offers at once)

• HonestCasa
• LendingTree

Pro tip: Start with a marketplace

Platforms like HonestCasa let you see multiple offers with one inquiry. Then you can cherry-pick lenders to apply with directly.

Step 3: Compare These 7 Things (Not Just Rates)

The advertised rate is bait. Here's what actually matters:

1. APR (Annual Percentage Rate)

Includes fees in the cost calculation. A 7.5% rate with $2,000 in fees might have a higher APR than 8% with no fees.

2. Margin Over Prime

Your rate = Prime Rate + Margin

If Prime is 7.5% and your margin is 1%, your rate is 8.5%. When Prime changes, so does your rate—but your margin stays fixed.

Lower margin = better deal long-term.

3. Rate Caps

A lower lifetime cap protects you from extreme rate spikes.

4. Draw Period Length

How long can you borrow?

• Standard: 10 years
• Some: 5 years or 15 years

Longer = more flexibility.

5. Minimum Draw Requirements

Some lenders require you to take $10K-$25K at closing. If you just want a credit line "in case," this is a problem.

6. Closing Costs

Range from $0 to $3,000+. Ask for an itemized breakdown:

• Application fee
• Appraisal fee
• Title search/insurance
• Recording fees
• Annual fee

7. Prepayment Penalty

Some lenders charge $300-$500 if you close in the first 2-3 years. If you might refinance or sell soon, avoid these.

Step 4: Get Loan Estimates in Writing

Don't trust verbal quotes. Request the official Loan Estimate from each lender.

This standardized form shows:

• Loan amount and rate
• Estimated monthly payment
• Closing costs (itemized)
• Total interest over loan life

Compare these side-by-side. Same format = easy comparison.

Step 5: Negotiate (Yes, You Can)

HELOC terms are negotiable. Here's how:

Ask for rate matching

"Lender X offered me 7.25%. Can you match or beat it?"

Most lenders have some flexibility—especially on margin.

Ask about fee waivers

"Can you waive the application fee?" "Is the annual fee negotiable?"

Closing costs are often soft. Lenders may waive fees to win your business.

Use relationship leverage

"I have my checking, savings, and mortgage with you. What discount can you offer?"

Banks often give 0.25-0.50% rate discounts for existing customers.

Time it right

End of month and end of quarter, loan officers are motivated to hit numbers. Better deals happen when they need to close.

The 14-Day Rate Shopping Window

Worried about multiple hard inquiries hurting your credit?

Don't be. Credit scoring models recognize rate shopping. All HELOC inquiries within a 14-day window count as ONE inquiry.

So you can check 5 lenders in two weeks with minimal credit impact. Use this window strategically.

HELOC Shopping Checklist

Print this. Fill it out for each lender:

LENDER: _______________

Basic Terms:
□ APR: _____% 
□ Margin over Prime: _____% 
□ Lifetime rate cap: _____% 
□ Periodic rate cap: _____% / year

Structure:
□ Draw period: _____ years
□ Repayment period: _____ years
□ Minimum draw at closing: $_____
□ Maximum credit line: $_____

Costs:
□ Application fee: $_____
□ Appraisal fee: $_____
□ Closing costs total: $_____
□ Annual fee: $_____
□ Prepayment penalty: $_____ (if closed within _____ years)

Timeline:
□ Days to approval: _____
□ Days to funding: _____
□ Appraisal required? □ Yes □ No

Notes:
_______________________________

Common Mistakes to Avoid

Mistake 1: Only comparing rates The lowest rate with high fees might cost more than a higher rate with no fees.

Mistake 2: Skipping credit unions They're often 0.5-1% cheaper than banks. Worth the membership hassle.

Mistake 3: Not reading the fine print Minimum draws, prepayment penalties, and rate caps matter. Read the disclosures.

Mistake 4: Rushing the decision Take the full 14-day window. A few hours of shopping can save thousands.

Mistake 5: Forgetting to negotiate Lenders expect it. If you don't ask, you won't get a better deal.

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FAQ

How many HELOC quotes should I get?

At least 3, ideally 5. More data points help you identify what's normal versus what's a great deal.

Does shopping for a HELOC hurt my credit?

Minimally. All hard inquiries for the same loan type within 14-45 days (depending on scoring model) count as one inquiry. Shop within that window.

Should I get a HELOC from my current bank?

Maybe. Ask what relationship discount they offer, then compare to other lenders. Loyalty doesn't always equal the best deal.

What credit score do I need for the best HELOC rates?

740+ gets you the best rates. 700-739 is good. 620-699 you'll pay more. Below 620 is tough.

How long does HELOC approval take?

Online lenders: 5-10 days. Banks: 21-45 days. Credit unions: 14-30 days. Ask upfront so you know what to expect.

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Ready to Start Shopping?

HonestCasa shows you real HELOC offers from multiple lenders in minutes. See your options, compare terms, and then apply directly to the lender that fits best.

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