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Denied for income too low

My local credit union was advertising a big HELOC promotion so I applied. I am retired with $35,000 in debt (car and credit cards). I requested a $60,000 line to pay off all debt and allow additional funds for home improvements. Current mortgage through another lender is $92,000 with market value of home estimated at $190,000. My monthly pre-tax income is $4000. My current mortgage payment is $1500. My credit union denied me citing a reason of insufficient income. Based on what I've read here, credit unions are supposed to have more lenient standards so would it be worthwhile to attempt to obtain a HELOC elsewhere? My current mortgage is scheduled to pay off in 7 years so I really don't want to pursue a refinance with cash-out option but I would like to access the equity in my home to pay off my other debts and leave just the mortgage/HELOC payments each month. Thanks in advance for any suggestions. by townsond158 from Navarre, Florida. Mar 24th 2017 Reply


William J Acres (William_Acres)
#1 ranked lender in Arizona - 7,862 contributions

To advise you properly, we would need to see your complete loan profile.. but in general.. there is no "Conforming" set of underwriting guidelines for HELOC's... so everyone who offers them will have their own rules.. and although it is true that CU's are a bit more lenient.. it's not always the case.. If you go back 20 years.. credit unions would lend to borrowers who had bad credit, but never missed a payment to the CU.. this was an acceptable risk, even for the smallest credit unions.. but today, when everyone is basically a number, there is no longer that personal experience.. you must meet their minimum eligibility requirements to be approved.. This all being said, most lending guidelines require a maximum of 45% DTI.. for $4000 per month income, your minimum monthly obligations on all DEBT cannot exceed $1800.. If you leave your existing first mortgage in place, then you have $300 left for car payment, credit cards and the new HELOC... Even if you payoff all the other debt, and only have the HELOC, that still only leaves you with a max payment of $300 per month.. When it comes to qualifying for a HELOC, the lender has to assume will max out the HELOC.. so your estimated payment will be based on $60K... This might be why they denied you.... There are lenders out there that will lend based on asset depletion, or if you have a high net worth, there might be something out there, but the terms and rates for these loans are typically pretty high.. I'm a preferred Lender with Arizona and California being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893

Mar 24th 2017
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Larry Gray (lgray_312_247)
#564 ranked lender in California - 1,127 contributions

It sounds like your credit union may not allow paying off debt to qualify? I recommend trying other banks all the same. Did you ask your loan rep. there if they did not allow paying off debt to qualify for the equity line of credit? It is pretty difficult to find somewhere that will give you a heloc without your total debt to income being 45% or less.

Mar 24th 2017
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My loan officer told me that the debts I was going to pay off with the HELOC were not included in my DTI. My DTI for just the mortgage payment is right around 40%, not including the HELOC. So, I guess that means I'm excluded for any possibility of a HELOC with any lenders then?

Mar 24th 2017
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Linda Wintersteen (Linda123)
#63 ranked lender in Arizona - 1,250 contributions

I have a way, after 32 yrs in the mortgage industry, without income. I just need to know your fico score.. I can loan up to $250,000 within 14 days.. The lowest that I can lend is $10,000 I have numerous of clients buying homes this way you can call me at 602 330 1598 linda lindaonthego@outlook.com

Mar 25th 2017
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Sara Deere (SARAinMO)
#1 ranked lender in Kansas - 492 contributions

I am not sure how old you are, because some people are allowed to retire at an early age. Have you ever considered a Reverse Mortgage refinance?

Mar 27th 2017
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