Getting a mortgage should I ask for a line of credit at the same time?

[indiasnowden]

I am getting a mortgage through Wells Fargo. i am putting 20% down. i would like to get a line of credit at the same time as the mortgage. How will the line of credit report and will that have a negative effect on my score? I plan on staying in my house for at least ten years.

[Lel]

I assume you talking about a home equity line of credit (HELOC), is that correct?

In the old days, it was possible to get a HELOC or home equity loan at the same time as a first mortgage.  That's the way some purchases were structured - for example, an 80/15/5 mortgage would mean a first mortgage for 80% of the purchase price, a second mortgage (could be a HELOC or a fixed-rate home equity loan) for 15% of the purchase price, and a 5% down payment.

I don't know if it's possible to do this anymore, but it might be possible to get a HELOC shortly after closing.  The question is how much of a line you can get.  It used to be possible to get HELOCs for up to 115% of the home's value (that is, first + second mortgages = 115% LTV), but for obvious reasons this is no longer the case.  I don't know where things stand right now, but I believe there are some second mortgage lenders willing to go up to 90% of LTV, perhaps even higher depending on location.

HELOCs are by design and definition revolving lines of credit.  Thus, they are usually reported as revolving, and there's no way to compel a lender to not report it as revolving.  However, depending on the credit limit, the loan classification (i.e. whether it is identified as real estate or mortgage type account), and the credit bureau, it may be scored as installment debt.

Because it would represent a new credit account, with an associated inquiry and a net decrease in the average age of accounts, you may see a drop in your scores.  If it is scored as an installment loan, then the drop might be minimal.  If it is scored as revolving, then if it has a large balance it would affect your utilization and have a potentially greater impact on your score.

[indiasnowden]

Thanks for the helpful info.  Based on your info I have decided to wait until the house closes, live there at least a year, my car is paid off and then think about a credit line.  Your advice is most appreciated.