HELOC Application - Boarder vs. Rental Income: Unable to qualify
HELOC Application - Boarder vs. Rental Income: Unable to qualify for higher Equity credit line
I initially requested a set amount on my HELOC application but lender has capped it at $30K less than requested based on debt to income ratio and refused to use the rental income. My guess is that underwriting may be considering my income as “boarder income” in which case I can understand that, because the lender might view the income as not stable enough to be counted like a regular rental.I do however have full leases and it is not “boarder income” but rather “rental income” and hits my tax returns without any issues, so I am just a little confused. So to give you a little insight into my living situation:I am house hacking in one of my duplex properties. I figured I don't need the extra space in the upper unit plus needed to bring in more cash, so came up with the brilliant idea of renting my upper unit and moving into basement.The property is an official duplex property with approved ADU as registered by Jefferson County.One unit (the one with crawl space) has one address we shall call 1225 Bell Street but falls under the main property address (suspecting this is causing some of the problem) - which we shall call 1235 Bell Street. The second unit, is 1235 Bell street (which also happens to share the name of the property under JEFFCO records) and this comes with approved ADU which is where I live and then rent out the top.The unit has separate entrance, separate bathroom, kitchen and entirely different living space.I never see my tenant who lives in 1235 Bell Street top unit while I live in the basement unit, so my lease is an official lease not a "roommate" lease so essentially providing "rental" not "boarder income".
The challenge: Lender does not want to consider rents from either units in evaluating my debt to income ratio. I have great credit, stable income (10 plus years with same employer and great pay), and I have lived on this property for 2.5 years now.
Oh boy, I am so trying to fight this with my HELOC application and appeal to lender. I got online and decided to goggle to understand this and have decided to reach out to this community to see if there are any suggestions. Perhaps the obvious suggestion would be to try another lender in the event that it is determined that current underwriting guidelines are incorrect, but I am so hoping that my appeal to lender will be taken into consideration. I was nice and provided the facts in a professional manner and generally appealed to have their underwriting team reconsider based on this. This HELOC means a lot to me, so it is a little disappointing to get this far and hit this seemingly brick wall. Any suggestions and/or comments of similar experiences and how you got around this will be greatly appreciated. Perhaps am just uninformed on this and need to self-educate. I have heard of stipulations requiring staying in the home for about 2 years (been there 2.5 years) and that some lenders will use 75% of the income. Current credit union will not even use 1%!
My loan officer seems nice and she is trying to go back and fight for me, but at the end of the day underwriting calls the shots. Waiting patiently. Worst case scenario, I just go with the HELOC amount they approve (as I really do not have time to start another application at this time) and try again next year or two with a different lender. The explanation I got was, "they will not count rental income for the same property that you live in ...", which is what got me to think they may assume it is one unit and a roommate type situatio so I figured I have nothign to loose by trying to appeal by explaining my situation. They also have a copy of the appraisal that explains current setup which supports the above so we shall wait to see. Just really dissappointing is all. 