I've been really confused by how the HELOC affects your DTI. All else being equal, how does the potential HELOC loan amount and payments affect your DTI? Does it factor in at all? It makes no sense it wouldn't affect DTI.
Yes but what about BEFORE it is utilized? If I have HELOC in place with a 200K limit but I haven't taken anything out on it, does it affect anything? I could take it at any time but do they only care about what I have taken out?
@Joe C. It's my understanding that once in place, it will only count towards your DTI once you've used part of the 200k as @Brian G. mentioned. In this scenario, if you went to a lender today for a loan and didn’t use any of the available 200k, it’s not a concern to the bank. However, you use 100k of the available 200k then the monthly payment you’re making on that 100k is looked at by lenders towards your DTI from an underwriting perspective.
I've used the Credit Union for (2) HELOC's and posed the same question. I was told the HELOC's are "viewed differently" by lenders during underwriting. I'm sure a lender or UW can explain in more detail but that's been my experience.
@Josh M. Remember 2 things about Helocs: 1) they are backed/secured by real property unlike a credit card, ie there is collateral for the loan 2) when you have a credit card with any size limit but a $0 balance and a bank is underwriting you it is not counted against your DTI because you do not currently have a balance and thus no current monthly payment. Hope that brings a little more clarity!
@Josh M. So in my experience, how the DTI is calculated is different with each lender. I've used HELOCs multiple times with different lenders. They have always calculated a percentage of the available credit against my DTI, even with NO balance. One lender they attribute 35% of the full credit limit, at the other they used 50%. I don't know which lenders are saying they use 0%, possible I suppose. But, that would be high risk to them. You're currently at zero, you used some of your heloc as a down payment to get a new loan, then immediately max out the heloc super jumping your DTI... they are trying to hedge against that scenario.
I secured HELOC's on my 2 rental properties earlier this year using Penfed and they were easy to work with. If you are going to secure a 10% down vacation loan, I have heard that is is necessary to have the money in your primary account for a few months. Do others have experience with this? I have the same plan.
@Josh M. So in my experience, how the DTI is calculated is different with each lender. I've used HELOCs multiple times with different lenders. They have always calculated a percentage of the available credit against my DTI, even with NO balance. One lender they attribute 35% of the full credit limit, at the other they used 50%. I don't know which lenders are saying they use 0%, possible I suppose. But, that would be high risk to them. You're currently at zero, you used some of your heloc as a down payment to get a new loan, then immediately max out the heloc super jumping your DTI... they are trying to hedge against that scenario.
Thanks for your help! Do you have Heloc lenders you would recommend? I've read PenFed and Synovus are good ones to check out.
I secured HELOC's on my 2 rental properties earlier this year using Penfed and they were easy to work with. If you are going to secure a 10% down vacation loan, I have heard that is is necessary to have the money in your primary account for a few months. Do others have experience with this? I have the same plan.
Thanks! I've read in a number of places about going to Penfed for Helocs.
@Jonathan Schwartz yes you do. They need 2 months of seasoning as any other loan would require through a traditional bank. I'm using a 2nd home loan right now for a new build in Cape Coral that required the 10% down. Total cost was $265k, and planning to convert to a LTR or keep as a possible STR. Not sure yet. LTR rents projected at $2300/mo. Post appraisal construction is between $340k-$410k depending on lot location. Would be happy to connect to share my experiences. Good luck!
Given the assets will need to be seasoned for 2 months (since you are using the HELOC for down payment), whatever amount you need for the 10% down, that total payment will be calculated in your DTI.