Utilizing HELOC for downpayment on new property questions

[Mike Miller]

I debated for 20 minutes on whether this question is appropriate for this forum and best I could come up with is "maybe"! If not, I apologize. I suppose it could be said that I am very early on in my RE investing and here is my current situation.

Been married for 18 years, wife has been a stay at home mom for 18 years (will be important in a minute). We have a smallish home currently into which we have about 70-80% equity. We need to move for my work, but it's not far enough to qualify for relocation assistance and so want to be smart about the move with the intent of making the next home be our primary home for at least a year, perhaps 2 and then start working on further investing.

To get it out of the way, I am unwilling to take a 401k loan for this, so that is not part of the equation.

We had been remodeling our current home for about a year, slowly and as we could, and cash flowing all of it so our liquid cash is lower than I would like it to be. Luckily, the homes in the area where we are moving too are very modestly priced so down payments are low relative to much of the country.

The challenge is that I know we have this equity in this home yet I need to extract it so that we can buy first, then sell existing. I have been researching a HELOC to accomplish this. Our current mortgage is actually not in my name, and in my wife's name only. She had bought the house just before we got married. However, since she has been a stay at home mom, I have been the sole person paying for everything. Both of us have excellent credit scores and my current actual DTI is only 7%, since the mortgage isn't actually considered. When you consider the price of home we are shooting for, it would be 25% front end with that mortgage. She does have some student loans and the mortgage, of course, so with no income, her DTI is effectively 100%. I have seen that is it possible for her to apply for the HELOC and I could co-sign and we should be able to secure the loan.

I have not yet applied for any pre-approval but actually almost started today until I realized that if I were going to use a HELOC for the downpayment, I wasn't sure how that would affect the mortgage application process as it pertains to credit and DTI. I plan on only taking a draw right before closing on the new home for the DP. I can cover closing costs no problem. I know the number one rule of mortgage application is do not apply for and receive any new credit from the time you get approved for a mortgage and closing so what is the best procedure and order should I approach this? Thanks!

Mike