Will HELOC hurt my chances for conventional mortgage?

[Steven Laux]

Hi,

I have a vacation rental property undergoing a post-hurricane rehab. I'm currently self-funding as much as possible while my insurance claim languishes in underwriting hell. I am interested in getting a HELOC against my primary residence to help with the current rehab, and to help with rehabs on future properties. My question is this:

Will having a HELOC hurt my chances of getting a conventional loan on a future flip? My plan is to have a $0 balance on the HELOC before applying for a conventional loan.

Any advice would be greatly appreciated.

Thanks,

Steve

[Russell Gronsky]

@Steven Laux, not at all. A HELOC is like a credit card, backed by real estate. If your balance is 0, then it does not count against your DTI. In fact, keeping current on your monthly payments will probably help you as it builds your credit score to pay your bills on time.

If you do end up with some debt still to pay when you go to get the conventional loan, you're going to want to make sure the balance on the HELOC is less than 50% of the total credit line AND you want to make sure your overall DTI is under 41%...or maybe it's 43%...I forget...it's one of those.