First Lien HELOC Texas: Complete Guide to Rules & Requirements 2026

Key Takeaways

• A Texas home equity line of credit can be structured with a maximum principal up to 80% of your home’s fair market value when combined with other home‑secured debt, subject to Texas constitutional limits on total equity borrowing.
• Texas requires a 12‑day cooling‑off period, a minimum of $4,000 for each HELOC advance, and closing at a lender, attorney, or title company office, all designed as constitutional consumer protections.
• First lien HELOCs sit in first position and are often structured to pay off your existing mortgage so they become your main home loan, making them attractive for free‑and‑clear owners or those consolidating higher‑rate debt.

If you're a Texas homeowner exploring ways to tap into your home equity, a first lien HELOC in Texas offers flexible access to funds, but with unique constitutional rules. Unlike a second lien HELOC that sits behind your existing mortgage, a first lien HELOC takes the first‑position lien on your property and is commonly structured to pay off your current first mortgage, so it functions as your primary home loan.

Texas law (Article XVI, Section 50(a)(6)) requires that the total principal secured by a Texas home equity line of credit may not exceed 80% of the home’s fair market value at the time the line is established. Texas law no longer restricts advances based on a 50% LTV threshold for lines of credit established on or after January 1, 2018. Homeowners can now continue to draw on their line of credit as long as the total principal balance does not exceed 80% of the home's fair market value.

This guide explains how first lien HELOCs work in Texas and whether this revolving credit line fits your financial goals. Truss Financial Group specializes in Texas first lien HELOCs with expertise in navigating constitutional requirements.

What Is a First Lien HELOC and How Does It Work in Texas?

A first lien HELOC is a home equity line of credit in the primary mortgage position, meaning it sits in first lien priority on your property and often pays off your existing first mortgage so that it becomes your main home loan (or your only mortgage if you own the home free and clear).

The structure includes two phases: a 10-year draw period where you can borrow, repay, and re-borrow with interest-only payments, followed by a 10-year repayment period with fully amortized principal and interest payments. The line closes after the draw period ends.

First lien HELOCs carry variable interest rates, typically the prime rate plus a lender's margin (0.5%–2%). As market conditions change, so do your monthly payments.

Texas‑specific requirements under Section 50(a)(6):

• 80% combined LTV maximum: The maximum principal that may be extended, when added to all other debts secured by your home, cannot exceed 80% of its fair market value at origination.
• $4,000 minimum per advance: Under the Texas Constitution, each draw on a home equity line of credit must be at least $4,000, which effectively prevents small, day‑to‑day purchase transactions on the line.
• Primary residence (homestead) only, 12‑day waiting period, 3‑day right of rescission, closing at a lender, attorney, or title company, and strict limits on certain lender fees (commonly implemented as a 2% cap on specified HELOC charges under Texas rules), all reflecting the consumer protections built into Section 50(a)(6).

First Lien HELOC vs. Second Lien HELOC: Key Differences in Texas

Understanding lien position determines how much equity you can access and what you'll pay in closing costs.

When first lien makes sense: You own your home free-and-clear, your existing mortgage has a high interest rate, or you want maximum equity access and are comfortable refinancing.

When a second lien makes sense: You have a low-rate first mortgage you want to preserve, need a smaller equity amount, or want to avoid full refinance closing costs.

Texas Home Equity Laws: Article XVI Section 50(a)(6) Explained

Texas embedded home equity protections in the state constitution, not just statutes. This makes them harder to change and more protective than most states.

Constitutional requirements:

• 80% combined loan-to-value maximum
• 2% cap on lender fees (excludes third-party costs like title insurance and flood insurance)
• 12-day mandatory waiting period
• $4,000 minimum per draw
• Primary residence (homestead property) only
• Natural person borrowers (not LLCs or entities)
• No prepayment penalties allowed
• Closing must occur at a financial institution, an attorney, or a title company office
• Cannot get another home equity loan for 12 months after closing

Texas vs. other states: In many other states, lenders commonly offer HELOCs up to around 85%–90% combined loan‑to‑value, and state law often imposes fewer structural limits; there is typically no constitutionally mandated waiting period, no fixed minimum draw size, and no requirement to close specifically at a lender, attorney, or title office.

The tradeoff: You'll wait longer (30–90 days typical) and follow stricter rules, but you're protected from the predatory lending practices that trapped homeowners in other states during the 2008 financial crisis.

How to Qualify for a First Lien HELOC in Texas

Credit and income requirements:

• Credit score: Most Texas HELOC lenders look for a minimum score in roughly the 620–680 range, with higher scores generally qualifying for better rates and terms.
• Equity requirement: Must maintain 20% minimum equity (due to 80% LTV cap)
• Income verification: Proof of ability to make interest-only payments during the draw period
• Debt-to-income: Typically 43% or lower

Property requirements:

• Must be your primary residence with a homestead exemption filed
• Owner-occupied only
• Natural person ownership (cannot close in LLC name)
• Located in Texas

Documentation needed:

• Property documents: Deed, homestead exemption, tax statements, property insurance
• Proof of Income documents: W-2s and pay stubs (employees), 2 years' tax returns, and bank statements (self-employed)
• Credit documents: Government ID, Social Security number
• Existing mortgage information (if refinancing)

Property valuation: Lenders typically require a full appraisal (~$600) to determine fair market value per Fannie Mae/Freddie Mac guidelines, though some portfolio lenders may accept CAD tax valuations (free/public but conservative) at their discretion.

Timeline expectations: Most Texas first lien HELOCs take 30–90 days to close, not just the 12-day waiting period. Factor in appraisal scheduling, title work, income verification, and attorney review.

Texas mortgage lenders like Truss Financial Group offer first lien HELOCs for primary residences, accept credit scores as low as 620, and specialize in bank statement underwriting for self-employed borrowers navigating Texas constitutional requirements. You can also use the self-employed mortgage calculator to get an estimate.

The First Lien HELOC Process in Texas: Step-by-Step

Step 1: Weeks 1–2: Application and waiting period

Submit your application with documentation. You'll sign the Texas A6 12-day letter, which starts the mandatory constitutional waiting period. The lender orders a property valuation and begins credit approval.

Step 2: Weeks 3–4: Underwriting

Income verification, employment checks, and credit history review occur. If required, the appraisal is completed. Title search begins to verify homestead property status and identify any existing liens.

Step 3: Weeks 5–8: Closing preparation

After the 12-day waiting period ends, title work wraps up. The closing disclosure is prepared (you must review it 3 days before closing). You schedule a closing at an approved location, lender office, attorney, or title company.

Step 4: Closing day and after

Sign documents at the approved location. The loan is recorded. Then the 3-day federal right of rescission begins; you cannot access funds during this period. After 3 days, your HELOC is active, and you can borrow money as needed.

Variables affecting the timeline

Appraisal scheduling, title issues, documentation delays, and market conditions. The fastest possible timeline is about 15 days (12-day wait + 3-day rescission), but 30–90 days is realistic.

How Interest Rates Work on Texas First Lien HELOCs

First lien HELOCs carry variable interest rates calculated as Prime Rate + Lender's Margin.

Current example (early 2026):

• Prime rate: 6.75% (as of February 2026; benchmarked to major banks' Fed funds rates).
• Lender's margin: 0.5%–2.0% (based on credit score and loan-to-value)
• Your rate: 9.0%–10.5%

Monthly payment during draw period: Balance × Rate ÷ 12 = Interest-only payment

Example: $50,000 balance at 7.5% rate = $312.50/month. If the Fed raises rates 0.5%, your payment increases to $329.17/month.

Draw period (years 1–10): Interest-only payments. Pay just the interest, or pay more to reduce the principal balance and maintain access below the threshold.

Repayment period (years 11–20): Fully amortized payments begin. Whatever balance you carry at year 11 determines your fixed monthly payments for the remaining loan term. The line closes; you can no longer borrow funds.

Because a first‑position lien reduces lender risk compared with a second‑lien line, first lien HELOCs generally carry lower interest rates than comparable second lien HELOCs, though the exact rate spread varies by lender and market conditions.

Costs and Fees: What to Expect with a Texas First Lien HELOC

Texas 2% fee cap: Lenders cannot charge more than 2% of principal in origination fees (excludes third-party costs).

Typical closing costs:

• Lender fees: $0–$500 (application, origination, underwriting, often waived)
• Appraisal: $600 (if required)
• Title insurance: $800–$2,000 (required for first lien)
• Recording/flood/credit fees: $90–$300
• Annual fee: $0–$100 (varies by lender)

Total estimated costs: $500–$1,500 (low end) to $2,500–$4,500 (high end with full appraisal and title work).

First lien HELOCs cost more to close than second lien HELOCs ($2,000–$4,000 vs. $500–$1,500) because first position requires full title work and title insurance, while second liens only need subordination agreements.

Using Your First Lien HELOC: Draw Strategies and Best Practices

Access methods: Most lenders provide checks, online transfers, debit cards, or wire transfers to access your credit line.

Remember the $4,000 minimum: Because Texas home equity lines require every advance to be at least $4,000, you generally cannot use a Texas HELOC for small daily purchases or one‑off minor expenses.

Smart draw strategies:

• Emergency fund: Keep a balance at zero (zero monthly payments) with funds available for unexpected expenses
• Home improvements: Draw as needed for renovation phases with interest-only payments during construction
• Debt consolidation: Make one large draw to consolidate debt and pay off high-interest personal loans or credit cards

Year 11 transition: The HELOC draw period ends, and whatever balance remains becomes fixed. Fully amortized payments begin (principal plus interest), often doubling or tripling your monthly payment.

Frequently Asked Questions About First Lien HELOCs in Texas

Can you do a First Lien HELOC?

Yes, if you meet Texas requirements: primary residence (homestead property), maintain 20% equity, a credit score typically 620+, and can document income to support monthly payments.

What are the rules for HELOCs in Texas?

Texas law limits total principal secured by your homestead to 80% of its fair market value at origination and bars new HELOC advances when the total principal outstanding on all home‑secured debt exceeds 50% of that value; it also requires a $4,000 minimum per draw, a 12‑day waiting period, a cap on certain lender fees, and closing at a lender, attorney, or title office.

What are the dangers of a First Lien HELOC?

High risk of foreclosure if you miss payments (your home secures the loan), variable interest rates can increase monthly payments significantly, require strong financial discipline, and a year-11 payment shock when the repayment period begins.

Is a HELOC a first lien or a second lien?

A HELOC can be either. A first lien HELOC takes primary position and replaces your mortgage. A second lien HELOC sits behind your existing mortgage as secondary financing.

Can a HELOC be in the first lien position?

Yes. A first lien HELOC becomes your primary mortgage and takes first position on your property. In foreclosure, it's paid before any secondary financing.

Is a first lien HELOC a good idea?

It depends on your financial goals. Best for homeowners who own free-and-clear or have high-rate mortgages, need flexible equity access, and can manage variable payments. Not ideal if you have a low-rate existing mortgage to preserve.

What's the difference between a first-lien HELOC and a second-lien HELOC?

First lien replaces your mortgage and gives access to up to 80% of the home value. Second lien sits behind your existing mortgage and is limited by the combined 80% LTV minus your first mortgage balance. First lien has lower rates but higher closing costs.

Does a HELOC require a lien?

Yes. All HELOCs are secured by a mortgage lien on your property. The lien gives the lender a legal claim to your home if you default.

What does 1st lien mean?

First lien (or first position lien) means this loan is paid first in foreclosure, before any other mortgage loans or secondary financing. This priority position reduces lender risk and typically results in lower interest rates.

How much equity do you need for a first lien HELOC?

You must maintain at least 20% equity in Texas. With an 80% LTV cap, you can borrow up to 80% of your home's value, but must keep 20% equity remaining.

Is a First Lien HELOC Right for Your Texas Home?

A first lien HELOC in Texas works best for homeowners who own free-and-clear or have high-rate mortgages and need flexible equity access. It's ideal for debt consolidation and home improvements with lower interest rates than personal loans.

Truss Financial Group specializes in Texas first lien HELOCs with bank statement underwriting for self-employed borrowers.

Get started with HELOC today!