HELOC denied need HELP with what to do next

10 Replies

So I applied for a HELOC on a rental property and was denied. It has been rented 1 year this month. Because there is no history of rental income with taxes from previous years and a former business income loss. I was denied due to that and the debt to income ratio being too high.

The rental we own 100% out right with $1165 a month cash flow.

We have our current mortgage at $219,000 and $5000 in cc debt and that is it. We have no other debt at all!! Our credit scores ,both mine and my husbands, are over 750! Any suggestions on how to move forward?

I am willing to do that but are these issues that will be a problem across the board. They said because it was a rental the debt to income ratio requirements are lower than a primary residence requirements.

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@Sandy Preston , this might be obvious- I understand that you want a HELOC on your 100% owned rental property. What is your intent for the funds? The group might be able to give you some ideas for raising money, but the best advice is probably going to depend on what you are trying to do next.

@Sandy Preston   File your taxes ASAP, so you can at least get last years income on Sch E (even if only 10 months worth of rent if I'm reading that correctly).  You have to file by next month anyway so just do it now.

Originally posted by @Sandy Preston :

So I applied for a HELOC on a rental property and was denied. It has been rented 1 year this month. Because there is no history of rental income with taxes from previous years and a former business income loss. I was denied due to that and the debt to income ratio being too high.

The rental we own 100% out right with $1165 a month cash flow.

We have our current mortgage at $219,000 and $5000 in cc debt and that is it. We have no other debt at all!! Our credit scores ,both mine and my husbands, are over 750! Any suggestions on how to move forward?

You could get a cash out refinance using a portfolio lender that doesn't do an income calculation. Depending on how much you take, your DSCR will not be too high (some don't even do a DSCR as long as it's leased). Your max ltv for cash out will probably be 75% depending on the lender, but if you take less, your rate will be lower.

Originally posted by @Sandy Preston :

So I applied for a HELOC on a rental property and was denied. It has been rented 1 year this month. Because there is no history of rental income with taxes from previous years and a former business income loss. I was denied due to that and the debt to income ratio being too high.

The rental we own 100% out right with $1165 a month cash flow.

We have our current mortgage at $219,000 and $5000 in cc debt and that is it. We have no other debt at all!! Our credit scores ,both mine and my husbands, are over 750! Any suggestions on how to move forward?

 If you bought it in 2018 and you haven't done your taxes yet this year you can use 75% of the lease agreement towards your income.  

Example:

Rent is 1k per month so in this example you can use 750 a month towards your monthly income.  

Now Heloc's on investments are tough so if you own the home free and clear I would recommend that you just do a cash out refinance and be done with it.