• Your house serves as collateral for a home equity loan.House image by Gon?¡ìalo Carreira from Fotolia.com
  
  One of the first steps in qualifying for a home equity line of credit (HELOC) is showing you can afford to make the monthly payments, even if you maxed out the loan. Your overall financial picture will be considered, with solid proof of sufficient income, stable employment and good credit often making for easy approval.
  
  

Salary

• Your salary and earnings must be large enough to cover the monthly payments on the HELOC along with other recurring obligations, such as your mortgage, credit card payments and car payment. Lenders will use a formula called debt-to-income ration to determine if you have enough income to qualify for the loan. According to the website Bank Rate, no more than 36 percent of your gross income should be spent on your recurring monthly payments. For example, if your monthly gross income is $5,000, then no more than $1,800 of that should be spent on recurring bills, excluding such things as insurance payments, retirement contributions and utilities.
  
  

Documentation

• You will be asked to prove your income by presenting documents including tax returns, checking account statements, investment earnings statements, W-2 forms and paycheck stubs.
  
  

No documentation

• So-called "no documentation loans" were popular when low interest rates sparked a housing boom in 2001. At that time, Bank Rate says that some lenders were making some loans based on little more than credit reports, evidence of regular deposits into a bank account and personal interviews. However, as of 2010, virtually no loans of that type were being offered, according to one major lender. When the loans were available they included the no-documentation loans for buyers with great credit, stated-income loans for people who did not draw a consistent salary and no-ratio loans for borrowers who did not wish to disclose their income, thus preventing the lender from calculating a debt-to-income ratio.