Disclosing the purpose of the HELOC

3 Replies

I am trying to obtain a $100k HELOC on a $200k out-of-state investment property that I own free and clear to use as a down payment ​for a new home that I will live in. WF recently rejected my application. Some of their assumptions and math were a little screwy (for instance, they subtracted my HOA, taxes and other expenses on the property TWICE, giving me a net loss on the property). But their rejection also seems to be based in part on the fact that I told them I wanted to use the $100k as a down payment on a $350k home. So they assigned me additional debt based on that anticipated purchase. (Here again, they screwed up the calculation by assuming I wanted a $350k mortgage as opposed to a $250k). In any event, I have applied with a new lender who wants to know the purpose of the HELOC. Do I need to answer? Can I be vague about the money's purpose? Or should I tell them I'm seeking a lower-costing home? Any help is much appreciated!

You're taking out the HELOC so that your real estate investing business has the liquidity to handle anything that might come up. Not a lie or fraud, and also not over-disclosing.

@Raam W. , assigning "additional debt based on that anticipated purchase" - makes sense to me. Sure, it's the mortgage Lender that you'd be borrowing the additional $250k from who should make that call, but, the same questions will be asked!

ie. Can you well afford to repay an ELOC and an extra mortgage, with no additional income?

Welcome to BP. All the best...

@Raam W.   Just a thought - in theory it shouldn't really hurt you to disclose your intended purchase.  Even if they do factor in another $250,000 of debt for a new house, you should have sufficient income to cover this payment.  If you don't have enough income, how will you qualify for that $250,000 when it's time?  Of course this depends on them inputting the correct numbers.

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