Will a bank approve HELOC to purchase investment property?!

Question

Hello everyone. I'm very new at REI. In fact, I have not purchased my first investment property because I dont have the funds.  I do have about $150k equity in my primary home.  I applied for a HELOC through a major bank and was denied due to DTI.  I have good credit, very little debt and received a counter offer of $25k.

My question:  I know there are many "investment friendly" banks out there, but will they approve a HELOC with the intentions to purchase an investment property, regardless of DTI.  I guess the real question is if they will consider the potential rental as "income". If so, which banks should i consider and how should i go about that process.

Thanks so much in advance.

Tom S. · Answer

@Dessiree Jimenez I recently used Aven bank with has an interesting concept of issuing a credit card, with the limit determined by the equity in your home and the LTV they would lend to.

They were easy to use, did a soft credit pull and offered me $100k at 6.99%, no fees at all. I proceeded, at which time they did the hard credit pull, set up an appointment with an on-line notary and I signed all the docs.  This was all on Monday and it showed on my credit report today as a new home equity line.  So quick and easy.

The actual concept of using the card I can't comment on yet (as I haven't received the card in the mail yet) and it will be interesting. They offer 1.5% cash back on charges, and 2% balance transfer fee to pull money into my checking acct.  Not super happy about that fee but the ease of the application and speed were really nice.

Rob Lawrence · Answer

I am currently using a HELOC against my primary to purchase rental property.

There are a few things to note.  First, find a bank that offers a high Loan to Value on your property.  Some will do 85%, I have heard as high as 90%.  Another important thing is to have a real appraisal done.  The ones their computer does can be really conservative.

I just went through this process with WSFS and happy to share my contacts there for you.

Dessiree Jimenez · Answer

Hello Frank

I ended up getting approved for a HELOC @8%. It's significantly higher than most traditional HELOCs but with them I was able to get $130k. I need to do something quick with this money so im able to pay it asap.  My goal is to BRRR. I'd like to acquire a few LTR/STR to replace my w2. Im stuck! I dont know where to start. My market is way too expensive right now. (SoFLo) I'm considering other markets but dont have anything in mind. I'd love any feedback.

Thank you

Dessiree

Tom S. · Answer

@Roman Soltinschi  Hi Roman - Aven does an online appraisal.  I'm assuming they put a 2nd lien on the property but at the same time, it was so quick I don't see how they could have done a title search.  Unless in my state they have really quick on-line access for a title search (the property in question is in CA).  They did state via the mobile notary that I acknowledged / understood that the loan was against my property.

Good luck and hope it works out if you proceed!

Dessiree Jimenez · Answer

Cool! Thanks for sharing 👍🏽

Roman Soltinschi · Answer

@Tom S. I'm wondering if Aven puts a second lean on the home. Asking because I already have a second lean on my primary residence that comes from the down payment assistance (DPA) program and if so they may ask me to pay off the DPA before I could proceed with them. Today it's the second time I went through the soft pull with Aven, tried couple months ago they offered $35k at 6% and today's offer was $50k at 8.74%. I also checked my local credit union web site, today's rate for HELOC is around 8% meanwhile couple months ago it was 4.25%. The equity I've got in the house is around $160k (I owe $301k on the primary and $8k on DPA; Zestimate $468k, my neighbor sold his house a month ago for $530k). Does Aven do a physical appraisal or only use online data for it?

Thanks!

Tom S. · Answer

@Dessiree Jimenez  You mentioned getting approved at 8% which is significantly higher than most HELOC's.  Where else were you seeing much lower HELOC quotes?  The ones I see lower are for 1st position only.

I don't think 8% is a terrible rate for a 2nd position mortgage right now, IMO at least.

Dessiree Jimenez · Answer

Hi,

Thanks for your input. My issue is my DTI :(  credit is good and the equity is there.

Will a bank approve HELOC to purchase investment property?!

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