Blog · Equity Strategy
Home equity loan with bad credit? Below 620, your equity decides the answer, not your score.
Most lenders stop reading your file at the credit score. Below 620, the question that actually matters is how much of your home you own. Here are the six paths that work, with the plain numbers for each.
By Chase Zhao, President · NMLS #1816148 · Published November 10, 2026 · 9 min read
Short answer
Yes, you can tap home equity with bad credit, but below 620 most HELOCs and home equity loans are off the table. Cap Rate Funding routes sub-620 homeowners by equity instead: a Home Equity Agreement accepts credit from the 500s (up to 75% combined LTV at 580+, 11 states), FHA cash-out refinances are accepted below 620, and deep-equity refinances can proceed at any score.
Here's the call I get every week. A homeowner has owned the house for years, owes far less than it's worth, and wants a home equity loan with bad credit: a 560 or 590 after a divorce, a medical year, or a business that went sideways. They've already been told no, usually in the first two minutes, because the lender's software saw a number under 620 and stopped reading. Nobody asked how much of the house they own. That's the question that decides this file.
Why most home equity loans stop at 620
Most HELOCs and home equity loans have a credit floor around 620, and ours is no exception: the Cap Rate Funding HELOC has a hard 620 minimum. A HELOC is a second lien with a monthly payment, so lenders lean heavily on your score to judge whether that payment gets made.
Below 620, the tools change. Instead of asking "will this person make a new payment?", the lenders who work this space ask "how much equity protects this file?" Deep equity, a clean recent mortgage history and the right state can carry a file a credit score can't. That's why the six paths below are sorted by equity and state, not by score.
The one-line version: under 620, the less you owe against the house, the more doors open. Under 50% loan-to-value, the list of options gets surprisingly long.
The six ways to use home equity with credit under 620
Cap Rate Funding, a non-QM direct lender and broker in Irvine, CA, routes sub-620 homeowners through six paths, each with its own equity, credit and state rules. Here they are side by side.
| Path | Credit accepted | Equity rule | Your first mortgage | Where |
|---|---|---|---|---|
| Home Equity Agreement | From the 500s | 60% CLTV at 500–539 · 65% at 540–579 · 75% at 580+ | Stays in place | AZ, CA, CO, FL, NV, OH, OR, PA, TN, UT, WA |
| FHA cash-out refinance | Below 620 accepted, file reviewed on a call | Cash-out up to 80% LTV; no mortgage lates in 12 months | Replaced | 21-state primary footprint |
| Conventional refinance | Below 620 by exception | Existing balance under 65% of appraised value | Replaced | 21-state primary footprint |
| Owner-occupied hard money | Any score in the two exceptions | Idaho: balance at or under 30% of a $300K+ home · OR/WA/ID free and clear: loan over $200K at 50% LTV or less | Depends on structure | OR, WA, ID |
| Reverse mortgage (HECM) | Any score | Existing balance under about 50% of value; program requires age 62+ | Replaced | 21-state primary footprint |
| DSCR (rental property) | No hard minimum | Capped at 50% LTV below 620 | Replaced on a cash-out | 47 states (not SD, ND, VT) |
All loan figures are maximums before closing costs and subject to approval. Every primary-residence path is limited to our 21-state owner-occupied footprint.
Path 1: The Home Equity Agreement, built for credit in the 500s
A Home Equity Agreement (HEA) is the most direct answer to a home equity loan with bad credit, because there's no monthly payment to underwrite. You receive cash today, up to $600,000, in exchange for a share of your home's future value. The agreement settles when you sell, refinance out, or buy it out early with cash.
- Credit: accepted from the 500s. Your credit band sets the maximum combined leverage: 60% at 500–539, 65% at 540–579, 75% at 580+.
- Your first mortgage: stays exactly as it is, rate included.
- States: AZ, CA, CO, FL, NV, OH, OR, PA, TN, UT and WA only. Not available in Texas.
- The trade-off: it isn't a loan and it isn't free. The cost is the share of future value the provider receives at exit, set by the individual offer and confirmed in writing before you sign. Disclosed costs are on the HEA page.
Best if: you're below 620 in an HEA state, owe 75% or less of the home's value, and want cash without adding a payment. Many clients use it as a bridge, then refinance out once their credit recovers. Our HEA vs. HELOC comparison walks through when each one wins.
See what your equity can do below 620
Enter your home value, balance and credit range. You'll see which paths fit your state in about 60 seconds, with no hard credit pull.
Prefer a human? Call or text 949-738-9770 · no call center, no hard credit pull to see options.
Path 2 and 3: Refinance the first mortgage, FHA or conventional
A cash-out refinance replaces your first mortgage with a bigger one, and two agency versions work below 620.
FHA: with us, FHA refinances below 620, including cash-out, are accepted at any LTV, with the file reviewed on a call. Cash-out goes up to 80% LTV on a home you live in, and you need no mortgage late payments in the last 12 months. Most lenders overlay a 620 floor on FHA; we underwrite the file FHA actually allows. FHA mortgage insurance applies, so read the FHA guide for how it works.
Conventional: below 620, a conventional refinance can proceed when your existing balance is under 65% of the appraised value. Above that line it's an honest no, and FHA or an HEA is usually the better route.
The catch with both: your current first mortgage gets paid off and replaced. If you're holding a low rate from a few years ago, that's a real cost. An HEA or, once you cross 620, a HELOC leaves that first mortgage alone.
Path 4: Deep equity in Oregon, Washington or Idaho
Two exceptions let a homeowner in the Northwest refinance at any credit score when the equity is deep enough.
- OR, WA and ID free and clear: if your home has no mortgage, the loan is over $200,000, and the loan-to-value is 50% or lower, an owner-occupied cash-out refinance can proceed at any credit score.
- Idaho deep equity: an Idaho primary-residence refinance can proceed on hard money below 620 when the existing balance is at or under 30% of the home's value and the home is worth $300,000 or more.
Owner-occupied hard money is rare; most hard money lenders are investment-only. The owner-occupied hard money guide has the full rules.
Path 5 and 6: Reverse mortgage and rental property equity
A reverse mortgage works at any credit score, and a DSCR loan qualifies a rental on its rent instead of your score.
Reverse mortgage (HECM): the program requires age 62+ and a primary residence, with the existing balance under roughly 50% of the home's value. There's no monthly mortgage payment (taxes and insurance must stay current), HUD-approved counseling is required, and you keep title. Our reverse mortgage explainer covers how it works.
Rental property: if the equity is in an investment property, DSCR loans have no hard minimum score. Below 620, the loan caps at 50% LTV. They qualify on the property's rental income, not your tax returns, from $75,000 to $3,000,000 in 47 states.
How much can you get with bad credit? A worked example
Your equity, your credit band and the product decide the number, and the gap between them can be large.
Example: a California home worth $600,000 with a $180,000 first mortgage (30% LTV). The owner has a 560 credit score. Figures are maximums before closing costs; hypothetical, and subject to approval, valuation and program terms.
| Option | Max leverage | Max total debt | Cash available (before costs) | First mortgage |
|---|---|---|---|---|
| HEA at 560 credit | 65% CLTV | $390,000 | Up to $210,000 | Kept |
| HEA if credit reaches 580+ | 75% CLTV | $450,000 | Up to $270,000 | Kept |
| FHA cash-out refinance | 80% LTV | $480,000 | Up to $300,000 | Replaced |
| HELOC once credit reaches 620+ | 90% CLTV | $540,000 | Up to $360,000 | Kept |
Two things jump out. First, at 30% LTV this owner isn't stuck; there are real options today. Second, every credit band they climb adds leverage. That's why some homeowners take a smaller HEA now and plan the HELOC or refinance once their score crosses 620.
What changes when you cross 620
At 620, the HELOC opens: up to 90% combined LTV, lines from $50,000 to $5,000,000, and your first mortgage stays untouched. There's no appraisal appointment on lines up to $1 million (an automated valuation is used instead), no tax returns, and funding can happen in as little as 5 business days. In Texas, state law caps home-equity borrowing at 80% combined LTV and sets a 12-day minimum. If you're close to 620, it's worth asking what the jump is worth before you choose a path; the 5-day HELOC guide has the full terms. And if your debt is the reason the score dropped, our post on using a HELOC to pay off credit card debt covers the honest math once you're there.
Who this is not for
Some files are an honest no today, and we'd rather tell you now than after a credit pull.
- Homes outside our 21-state footprint. On a home you live in, we lend only in AL, AZ, CA, CO, FL, ID, IA, LA, MD, MI, MN, NM, NV, OH, OK, OR, PA, TN, TX, UT and WA.
- Owing most of the home's value. Below 620, if your balance is above about 75% of value, the HEA has no room, and an FHA cash-out tops out at 80%. There may simply be no equity to reach yet.
- Recent mortgage late payments. FHA cash-out needs no mortgage lates in the last 12 months.
- Manufactured, mobile or pre-fab homes. No HELOC or HEA on factory-built housing; a few narrow routes exist on specific programs, confirmed on a call.
- Buying a home. This post is about equity in a home you already own.
Recently funded at Cap Rate Funding
A sample of recent files across our programs (not all sub-620):
| Deal | Location | Loan amount | Highlight |
|---|---|---|---|
| HELOC | Santa Fe Springs, CA | $397,000 | Funded in 5 days |
| P&L Loan | Irvine, CA | $930,000 | Primary residence · complex title solved |
| DSCR | Detroit, MI | $1,194,200 | 7-property portfolio, one client |
Recently funded Cap Rate Funding deals. Your terms depend on your own credit, equity, property and state.
A bank's "no" at 590 is one rulebook. We price your scenario across a network of 100+ wholesale lenders, and the first step is a 60-second form that shows your paths with no hard credit pull. If credit isn't your only hurdle, read denied a cash-out refi as self-employed next.
Common questions
Can I get a home equity loan with a 550 credit score?
Not a traditional HELOC or home equity loan at most lenders, including ours, because the HELOC has a hard 620 floor. At 550, the realistic paths are a Home Equity Agreement (credit from the 500s; 65% combined LTV at 540–579), an FHA cash-out refinance, or a deep-equity refinance, depending on your state and how much you owe.
What is the minimum credit score for a HELOC at Cap Rate Funding?
620, with no exceptions below it. At 620 and above, the HELOC reaches up to 90% combined LTV (80% in Texas) on lines from $50,000 to $5,000,000, with no appraisal appointment on lines up to $1 million.
Is a Home Equity Agreement a loan?
No. A Home Equity Agreement (HEA) gives you cash today in exchange for a share of your home's future value, settled when you sell, refinance, or buy it out. There are no monthly payments, but it is not free: the provider's share of future value is the cost. See the HEA page for the disclosed costs.
Will checking my options hurt my credit score?
No. Seeing your options at Cap Rate Funding uses no hard credit pull. A hard inquiry happens only later, at application, and only with your permission.
Can I use home equity with bad credit on a rental property?
Yes. DSCR investment-property loans have no hard minimum credit score; below 620, the loan is capped at 50% of the property's value. They qualify on the property's rent, not your income, and are available in 47 states.
What if I live outside the states you lend in?
On a home you live in, Cap Rate Funding lends only in 21 states (AL, AZ, CA, CO, FL, ID, IA, LA, MD, MI, MN, NM, NV, OH, OK, OR, PA, TN, TX, UT, WA). Outside them we can't help with a primary residence, though investment properties follow wider per-program footprints.
See what your equity can do.
60 seconds online. No hard credit pull. Your information is never sold.
Prefer a human? Call or text 949-738-9770 · no call center, no hard credit pull to see options.
Chase Zhao · President, Cap Rate Funding · NMLS #1816148
Non-QM specialist in Irvine, CA. Cap Rate Funding is a direct lender for P&L-only loans and a broker to 100+ wholesale lenders — HELOCs, DSCR, P&L, bank statement and home equity agreements.
Cap Rate Funding is powered by Federal First Lending LLC, Company NMLS #2381991. Equal Housing Opportunity. This article is general information, not a commitment to lend or tax/legal advice. All loans subject to credit approval. Program terms, loan-to-value limits and availability vary by state, property and credit profile and are subject to change; owner-occupied lending is available only in our licensed states.