All Forum Posts by: Anna M.

HELOC Application - Boarder vs. Rental Income: Unable to qualify for higher Equity!

I initially requested a set amount on my HELOC application but lender has capped it at $30K less than requested based on debt to income ratio and refused to use the rental income. My guess is that underwrite may be considering my income as "boarder income" in which case I can understand that, because the lender might view the income as not stable enough to be counted like a regular rental.I do however have full leases and it is not "boarder income" but rather "rental income" and hits my tax returns without any issues, so I am just a little confused. So to give you a little insight into my living situation:

I am house hacking in one of my duplex properties. I figured I don't need the extra space in the upper unit plus needed to bring in more cash, so came up with the brilliant idea of renting my upper unit and moving into basement.The property is an official duplex property with approved ADU as registered by Jefferson County.One unit (the one with crawl space) has one address we shall call 1225 Bell Street but falls under the main property address (suspecting this is causing some of the problem) - which we shall call 1235 Bell Street. The second unit, is 1235 Bell street (which also happens to share the name of the property under JEFFCO records) and this comes with approved ADU which is where I live and then rent out the top.The unit has separate entrance, separate bathroom, kitchen and entirely different living space.I never see my tenant so my lease is an official lease not a "roommate" lease so essentially providing "rental" not "boarder income".

The challenge:  Lender does not want to consider rents from either units in evaluating my debt to income ratio.  I have great credit, stable income (10 plus years with same employer and great pay), and I have lived on this property for 2.5 years now.  

Oh boy, I am so trying to fight this with my HELOC application and appeal to lender. I got online and decided to goggle to understand this and have decided to reach out to this community to see if there are any suggestions. Perhaps the obvious suggestion would be to try another lender in the event that it is determined that current underwriting guidelines are incorrect, but I am so hoping that my appeal to lender will be taken into consideration. I was nice and provided the facts in a professional manner and simply appealed to have their underwriting team reconsider based on this. This HELOC means a lot to me, so it is a little disappointing to get this far and hit this hurdle. Any suggestions and/or comments of similar experience will be appreciated. Perhaps am just uninformed on this and need to self-educate. I have heard of stipulations requiring staying in the home for about 2 years (been there 2.5 years) and that some lenders will use 75% of the income. Current credit union will not even use 1%!

My loan officer seems nice and she is trying to go back and fight for me, but at the end of the day underwriting calls the shots. Waiting patiently. Worst case scenario, I just go with the HELOC they approve and try again next year or two with a different lender. The explanation I got was, "they will not count rental income for the same property that you live in ...", which is what got me to try to appeal by explaining my situation.  They also have a copy of the appraisal that explains current setup which supports the above so we shall wait to see.  Just really frustrating is all. 

I am house hacking too @Christian Tallet, so I can completely relate to your situation.  It is tough but you really have to just put the blinders on, on some things, otherwise it will drive you nuts.  I really like @Michael Boyer's very well-thought out approach. All the best. Don't let it get you down, it can be done. As far as soundproofing goes, evaluate the cost and see whether or not it will provide a ROI. In some instances it will, in others, unfortunately tenants just have to learn to be cordial to each other. I for instance have quiet hours specified in my lease, but for the most part I have not had any issues on this with my new tenants, which is more than I can say with those inherited ones that would scream at the top of their lungs at each other during intense arguments, the entire neighborhood was so grateful when I evicted them, OMG. Oh well, best of luck to you! :)

OMG, @Gail K. that there is scary and makes you wonder what world we live in.I agree with you on the NO Contact.Hard when living on property, but I managed to do it, come and go without engaging.

@Christine Kankowski, yes my process took about the same time, during which time per eviction guidelines am not collecting any rents that they had piled on another tenant, unauthorized ofcourse, :(!Wait, did I read that right, “it was the prior owner who refused to leave or pay rent?!OMG!

I agree with @David S. and others above.  As a newbie landlord I made a couple of mistakes, one of which was babysitting my tenants and a year and a half later, I had, had enough of the inherited tenants.I more than bent over backwards and it only ended up hurting me as they pushed back on every policy with the “we didn’t do that before”….. uuhhhmmmm new management, new lease.Once you get into the habit of jumping every time tenants come complaining, you will quickly come to hate being a landlord.Somethings, can easily be mitigated by you asking that they resolve it among themselves and/or get the authorities involved.There are issues where legitimately you should get involved, noise and he said/she said is not one of them.Cheers!

OMG, this is so messed up! I had to evict tenants once that came with a property purchase after a year and a half of trying to really work with them, even bending over backwards to try to accommodate them, but eventually just knowing that this was not going to work and they were in turn destroying my property and pushing back on every policy. I really hate inheriting tenants as one can never be you sure of what you are getting. During the eviction process, I stayed away for the most part, dealing with them only through my attorney to avoid saying or doing anything that would nullify the eviction. I think it is important too, to remember that at that time (eviction) emotions are high so best to distance yourself. I truly feel so bad for this poor lady and hope that this man is severely punished for this kind of behavior. 

Have you ever had to evict tenants and if so what did you do, both to protect yourself from a safety standpoint and to avoid messing up on the evictions process?

@Bill S.  Thank you, that is very valuable information that I am definitely going to use as I continue my search.  Learning they say comes with making mistakes, some of them expensive ones such as this one from the point of view of money paid to structural engineer to inspect the property.  Yet it would have been more costly for me to move forward without that inspection and sometimes inspections reveal no issues, other times they reveal issues that are too costly to fix moving forward.  As you indicate, some structural issues may appear to be worse than they are, others, really are worse than they appear, either way an inspection offers valuable information as it did here.  The end report indicated a need for fixes, some just based on common knowledge would be a simple home depot run for supplies to re-grade so as to stop future problems, others, possibility of helical piers which just from structural engineers rough estimate as he did do similar work in the past, would have been a significant cost.  So looking at my finances I had to make the choice and I decided that while fixable, I just did not have the money because I tend to share the thought on something you brought up that being, that,  "In my experience most properties with structural issues are not discounted adequately to cover the cost to correctly remedy the problem(s)."  Knowing this it would not make sense to move forward in my situation with limited funds as it is.  It was definitely a valuable experience, a little costly but one that unfortunately was needed i.e. the inspection) to then decide what to do.  What I should have done as you rightfully point out is to seek sufficient time to be able to get all necessary bids.  Seems that in this market some sellers are looking for a quick sale and so may be a little unrealistic with deadlines, yet I cannot blame them for they may fear not being able to sale and prefer a buyer that will come in and be able to make a fairly quick decision.  Overall, great input and certainly well taken.  Thank you.

Once to twice a year exterior only and even that is "preventative".  Tenants take care of their own interior pest control needs. to eliminate concerns with allergies (them or their pets) to whatever treatments I use.  I insist that units remain clean to keep pests out.  I also do unit inspections and so far, so good. 

I kept getting up and moving forward despite the numerous falls as a newbie landlord.  My first property, I bought the home with existing tenants and inherited them.  I have since been afraid to take on that burden.  In some instances one may be lucky to find great tenants, but in some, it is a nightmare, and I had a nightmare with my inherited tenants, not good for a newbie, but I pulled through and got them out .  So many times I wanted to quit but thanks to good friends/mentors, I kept getting back up and moving forward.  Seems you and your wife are doing great in that area too, congrats!

Yes @Jerryll Noorden, I will definitely follow your seasoned advice moving forward.  I love your DIY flip experience and you seem to definitely have an eye for these things, so I have to actually start listening to you more often, lol!