Debt to Income Ratio for HELOC
Real Estate Broker · East TN Loudon/Lenoir City/Tellico Village · Member since 2014 · 363 posts · 222 votes
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
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.
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
From what you're telling us it looks like B of A is giving you a HELOC at around 75% LTV (Loan To Value) If you have had these properties for sometime then they will report on your Sch E. Depending on how much your wrote off that can be affecting your DTI.
Also on a side note the new loan levels for Orange County Jumbo Conforming is 637K and you would be getting close to that number. You don't want to go over that number if you want conventional rates.
I hope this helps and have a great day.
Hello @Rhonda Blue
It is unfortunate BofA won't look at your rental income. It is so hard to get a loan now a days with everything going on in the finance industry. Cash-Out Refi and use to funds for BRRRR strategy instead, you'll find a lot of great multi-family out of state. Were you looking to get into multi-family? What type of property are you looking to buy? I help and show people how to use some of their savings to create streams of income by investing in apartment buildings. Will be happy to chat some more.
I think it's time to shop for a new banking partner. The top 4-5 national banks are completely inflexible. Is there a local credit union or small regional bank you could form a partnership with? They are typically much more flexible in addition to having better customer service. Good luck!
BofA is the absolute worst! But I am admittedly biased because I had a miserable experience with them a while ago. Definitely shop around. HELOC products are very bank specific in regards to the rate and terms they offer so the more institutions you talk to the more likely you are to find a product that works for you.
I would seek out a local bank. They have a lot more flexibility built in to their cultures.
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.
update currently I'm in the process of working with our local usbank again I have all our docs submitted and am just waiting to hear back. Im trying to not get discouraged! I did try speaking to the BOfA rep and discuss how he came to our DTI numbers because my calculations show a much different number! He actually read from a script and said he couldn't help me discuss the calculations! I am very thorough and know my numbers The fact that people working with our financial information making these decisions do not know how the numbers are calculated enough to have a discussion is scary! Seriously learning a lot from this process! My DTI with the rental mortgages is only 23. I will persevere and have a story to tell. Thanks everyone for all your suggestions and advice. If this doesn't work I will reply to you who submitted for lending!
You dont want to do business with anyone who has to read from a script. My experience with local banks has been excellent. I encourage you to build relationships with the bank's management team. Even their C-level suite is very accessible via Chamber of Commerce events. Most of the time we schedule pre-meetings with the CEO or some senior person at the bank to build rapport and discuss the proposed project at a high-level. This is the time to disclose any issues you might encounter applying for a loan such as low credit score or whatever. Local banks do have flexibility and will try to develop a strategy or solutions if they are interested in working with you. You should walk out knowing where you stand since no one wants to waste their time. If there is interest, your next meeting will likely be scheduled with a loan officer BUT at the request of their senior manager. That goes a long way. Best of luck.
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