Primary residence HELOC for a new primary residence down payment

San Diego, California
Starting Out
3yFollow

Primary residence HELOC for a new primary residence down payment

Armando LeonPro Member
Member since 2020 · 7 posts · 4 votes

Hi, Im in the process of having a HELOC opened on my primary residence (Property #1). My plan is to move out in a couple of months to turn my primary residence into an investment property and use the HELOC for downpayment for my next primary residence (Property #2). Question, would I have any issues on doing that, considering the HELOC was applied on a primary residence (#1)? I already talk with the HELOC agent and for them it wouldn't be an issue as long as I don't sell my first property (#1); but speaking with my mortgage lender (for property #2) they told me I wont be able to get a primary residence home if I have that HELOC (primary residence terms) opened for less than 1 year.

Any thoughts on this?

Thank you in advance

1Reply
59 views

2 Replies

Jump to latestLatest
  • Dennis Muno
    Lender · Denton, TX · Member since 2023 · 349 posts · 80 votes
    3y
    Quote from @Armando Leon:

    Hi, Im in the process of having a HELOC opened on my primary residence (Property #1). My plan is to move out in a couple of months to turn my primary residence into an investment property and use the HELOC for downpayment for my next primary residence (Property #2). Question, would I have any issues on doing that, considering the HELOC was applied on a primary residence (#1)? I already talk with the HELOC agent and for them it wouldn't be an issue as long as I don't sell my first property (#1); but speaking with my mortgage lender (for property #2) they told me I wont be able to get a primary residence home if I have that HELOC (primary residence terms) opened for less than 1 year.

    Any thoughts on this?

    Thank you in advance

     Hello Armando,

    Well once you get the HELOC opened on your first property, keep in mind that will increase your debt to income, which may affect your ability to buy a home. A rising DTI means a lower or decreased credit score. However, if you make your payments on time on the HELOC, good!

    Does not mean you can't get another primary but it might. While it is rare, there are some some lenders who will go into the 500s for FHAs. You just have to find them. For conventional loans your DTI can't be an inch above 50%. I believe for FHA loans, some lenders will do up to 55% DTI with a manual underwrite.

    So credit wouldn't be your biggest concern but debt to income. However, if your DTI isn't insanely high you should be able to buy another home, provided you qualify.

    Ask your lender for #2 to go through the guidelines for the loan programs to justify why he says you can't buy a home #2 less than 1 year after getting the HELOC.

    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3y

    Hey Armando, 

    Sounds like an overlay on your mortgage lender's guidelines. Are you working with a mortgage broker or a big bank like chase? 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free