$210,000 in equity-Lender counteroffers HELOC request w/ $20,000
What the actual heck is going on in some underwriting departments? Does anyone know why a lender, who initial told us we could pull $159,000, then countered with $99,999, then countered again with $20,000 would do this?
Applying for a primary residence HELOC on a duplex, in the range of $110-150k to perform some renovations and use for down payment on new duplex purchase. Primary residence HELOC because my partner still lives there as his primary residence. Property is located in Boulder County, Colorado.
Current value: $545,000
Current remaining mortgage balance: $335,000 (Myself and my partner and both on the title and mortgage in our personal names)
Bank: Local credit union (the same bank that holds the first mortgage on this property)
Background: My partner still lives in the duplex as his primary residence. I've moved on to another property. Owned the property for 1y8m. Did a lot of interior renos (bathrooms, kitchen, repaint, fixtures, flooring) and added a bedroom. Have not renovated the exterior yet. Rented with 0% vacancy and 100% on-time rent payments.
Partner AGI is $106,320 (self employed x 10 months as an accountant. Was laid off for just over a year -due to COVID layoffs- but prior to that he has been employed consistently as an accountant since finishing his masters degree over 10 years ago. Also rental income) Credit Score 780.
My AGI $138,400 as a medical provider and rental income. Credit score 774
We have 4 mortgages (1 each and 1 shared as well as 1 shared HELOC) all of which are paid by our 5 tenants with $2000 monthly cash flow after the mortgages are paid each month. Other debts include a little credit card debt that he has, small auto loan of mine, and my student loans which equate to $9,240/year in required payments)
So, the HELOC loan officer was useless and told us she is frustrated with her job and basically dislikes her UW dept. because they work from home and she doesn't get to. But anyways, she shuffles the papers off to UW. They tell us they don't like that my partner only has 10 months of self employment and no tax return for this self employment. Tax return for 2020 was abysmal due to the layoff only 2 months into the year. Prior years look great (50-60k AGI). The UW refused to accept some of the rental income we have claimed (despite the fact we provided proof of rent payments and DocuSign signed leases from all tenants showing consistent tenancy and payments for the past 1 year 8 months.) We are also currently applying for a new mortgage to purchase another duplex and our loan officer and underwriter seem to understand all the moving parts that make up our portfolio (they "get it"). This HELOC lender does not. After the initial counter of $99,999, we very politely emailed back the HELOC loan officer to try to clear up any misunderstanding (things we learned can be confusing to some loan officers and underwriters in the past and that our other lender suggested we tell them to ensure they were understanding our financial situation). The HELOC loan office apparently forwarded that email to underwriting. From there, our HELOC application was escalated to the senior VP of underwriting for their bank who responded back by countering their initial counter offer with $20,000 final offer.
I am completely dumbfounded as to how this went down. We are under contract for another duplex and depending on the HELOC to make it happen. Lesson is learned-do your refinancing further ahead of time because you never know when something crazy like this will happen. We are already in contact with other lenders to obtain a HELOC before we hit deadlines on our contract. We'll ask to extend deadlines by a couple weeks to make it happen and if all else fails, we will bow out due to financing before our deadline. I feel bad for the seller if that happens (but I also know she had 18 other offers, so not that bad.) There have been some big lessons learned here as stated.
But back to this lender.....what could possibly explain a $20,000 HELOC offer when there is $210,000 equity in the property? Also, should I pay for an appraisal on my own in the future once renovations are done as we BRRRR (vs. waiting for the appraisal during the refinance/HELOC process?) Any other advice or things I am missing?