Home Equity Loan for Down Payment

[Jason Reider]

I have a single family house that I've been house-hacking by renting out 3 of the bedrooms. I'm looking to purchase my second property (hopefully a duplex) and believe using a home equity loan is the best way to tap into my equity to use as a down payment since my mortgage rate is 2.5%. I applied for a loan with my local credit union, but they called me to ask about the purpose of the funds. I explained I wanted to use it as a down payment for another property and they said they didn't think they could do that since another mortgage might put me under the DTI ratio. I explained I would use rental income to offset my first mortgage. They said they needed to talk to their supervisor and then called back and left a voicemail but I haven't called them back yet. Did I screw up by telling them I wanted to buy another property? I don't understand how it matters to them since I don't yet have another mortgage. Shouldn't they be evaluating my current risk? What should I tell them my plan for the funds are? Thanks in advance!