Debt to Income Ratio for HELOC

[Rhonda Blue]

Hello

I want to take advantage of the high appreciation rates currently in SOCal so I applied for a HELOC of 120,000. I have home value of 770,000 and owe 525,000. That is 245,000 in equity.

BofA has called and said that they will approve a Heloc for 50,000 that puts our debt to income ratio at the required 54.99.  We only have our one primary mortgage on our credit report besides a few cards that we use for business and pay off every month.  I was told that last time I bought a rental that our debt to income was below 30. 

We also currently have 4 other rentals that we carry mortgages but all are cash flowing! 

Am I missing something. I thought for sure we would be approved but at this rate It's impossible to borrow against equity for any real substantial sum! I'm thinking we would be better off doing a cash out refinance! But I wanted to try the BRRR strategy with a 120,000 HELOC!

Small Rant but I'm frustrated.... Thanks for listening

[Albert Bui]

Originally posted by @Rhonda Blue:

Hello

I want to take advantage of the high appreciation rates currently in SOCal so I applied for a HELOC of 120,000. I have home value of 770,000 and owe 525,000. That is 245,000 in equity.

BofA has called and said that they will approve a Heloc for 50,000 that puts our debt to income ratio at the required 54.99.  We only have our one primary mortgage on our credit report besides a few cards that we use for business and pay off every month.  I was told that last time I bought a rental that our debt to income was below 30. 

We also currently have 4 other rentals that we carry mortgages but all are cash flowing! 

Am I missing something. I thought for sure we would be approved but at this rate It's impossible to borrow against equity for any real substantial sum! I'm thinking we would be better off doing a cash out refinance! But I wanted to try the BRRR strategy with a 120,000 HELOC!

Small Rant but I'm frustrated.... Thanks for listening

 HI Rhonda,

Its very typical big banks do not count rental income, atleast recently acquired or non seasoned properties that have not been on your tax return for 2 full years each.

I've had similar experiences with big banks and credit unions (not all but most) on the borrower/investor end.

Fortunately for me I am a lender day to day so often times I will have to help collaborate on the structuring of the loan package to make sure its received in the best light possible regarding debt to income/ assets/credit or how its perceived. Every bank has differing takes on how they view a file as an institution even despite where they are selling the debt to (Fannie/Freddie/ other wall street firm/bank). These restrictions or overlays can make the lending experience more difficult especially when you're trying to acquire more properties as a RE investor.

Lending is very similar to law or tax in that if you change the presentation of the facts you can literally go from a decline to an approval.

Now back to your scenario above, I do have a HELOC up to about 90% of your primary home's value and we can use 75% of the rental income to qualify but you cannot own more than 7 financed residential properties total (6 non owners + 1 primary).

This will help bridge your gap in income and probably why you were told 30% DTI on another transaction and now you're hearing 54.99%.

I know the lake forest area very well and el toro high school.

Hope that helps.

@Tony Nguyen