Heloc application primary residence before moving into next primary residence

[Evangelina Obana]

Hi to all 

I am a brand new to this BP and a completely beginner investing in real estate.

I have applied for a second mortgage for my next primary residence and on the process hopefully closing at the end of August (brand new home), now I have contacted some credit union to apply a HELOC and advised me to apply before closing of my current primary home. If I will apply now for HELOC does it affect my credit score for my next primary application) The builder just pulled again my credit last 5/21/24 (for the second time), Does it affect in any circumstances my loan will fell out with the builder?, The builder told me that as long as my HELOC is zero balance on closing that will be okay, but I did not ask them if it will drastically lower my credit in case they will pull again for the third time with the builder. I am planning to get this HELOC before closing in order to buy another 3rd investment if God's willing. Any sincere advised will be much appreciated,

thank you so much.

Eva

[Kerry Baird]

For clarification: you have a first mortgage and a second mortgage on this new build? And then you are applying for a HELOC on that same house? What will your loan to value be? It also sounds as if your builder is also your lender?

Another pull on your credit is likely to drop your score a few points, as in 3.  Typically, when we close with a conventional lender there is paperwork we sign that states we intend to occupy the house for at least a year.  

My thoughts: The HELOC might be a good emergency fund, but basically it is a large credit card. It affects our DTI (dent to income) ratio, also like a credit card. A better plan that using this HELOC for a down payment would be to keep debt to a minimum so that your DTI is exceptional, and save up from your income for the next down payment.

[Evangelina Obana]

Thank you Kerry for your valuable feedback.

[Joseph Chiofalo]

Hi Eva, 

Typically the lender will underwrite the loan as if you used the full line of credit so it could potentially change your debt to income ratio. 

You should share the information with your lender so you dont come across any surprise issues as you get closer to closing.