HELOC affects on DTI - question!

[Hanan K.]

Hello BP members! We are preparing to leave our W2 jobs in a few months to move into full time real estate investing. 

We have a good amount of equity in our primary residence as well as one of our rentals and we would like to take out a HELOC on each property but we plan on purchasing a few investment properties before leaving our W2.

1) Should we apply for the HELOCs First? Will this affect our DTI even if they are at zero balances?

2) Does it make more sense to buy the rental properties first?

3) Is it possible to apply for multiple HELOCs on different properties at the same time? or do we need to do one at a time?

Thanks in advance!

[Justin Phillips]

@Hanan K. I would definitely start with your primary, as that's where you'll typically get the most access to equity. My wife and I ReFi'd our primary into a very specialized, 1st position line of credit. It's tied to a zero balance sweep account, so our regular banking saves us a ton of interest cost. Along with that, we have access to our equity for 30 years, so this one loan will fund many deals. It also greatly increases flexibility, and lowers DTI, among other things. It's been a great tool for us.

1. Open lines of credit, like credit cards, don't affect your DTI. Only outstanding debt balances contribute towards your DTI. 

2. If you find a great deal, definitely pounce! Otherwise, it's a good time to start getting funds and credit together to prepare for when the market eventually turns. Whether you find that deal in 1 month or 12, it never hurts to be prepared. As long as your credit isn't right on the edge, lining up capital is a good place to start.

3. Each property will have it's own underwriting/processing. It's definitely simplest to do one property at a time. After each property done you'll have the documentation ready for, so they should get easier and easier as far as the processing goes.