There's principal balance left to Home Equity Loan on our primary home. If we pay off the balance and reapply for another Home Equity Loan to use as our down payment, what are the chances of getting the mortgage for investment property? Is this worth the way?
We have trouble using our cash for our down payment so, we are thinking of this option to meet our closing deadline (perhaps extend few weeks) to get approved loan. Is this not a good option to think about?
Our DTI, income, credit score all seem to be good to go. Its just the proof of the asset is at freeze...
Flipper/Rehabber · Pittsburgh, PA · Member since 2014 · 144 posts · 21 votes
10y
If you can qualify with regards to DTI, you should have no problem utilizing a HELOC to close another property. Since the HELOC is actually 'your equity', it is not treated the same as other borrowed funds (like an unsecured personal loan or credit card). Consult with your loan officer though as some lenders may apply an 'overlay' and might have rules against allowing this. That said, generally speaking about guidelines, you should have no problem using your HELOC to help you close the purchase of another property.
Rental Property Investor · Yardley, PA · Member since 2008 · 1k+ posts · 561 votes
10y
I have done this successfully with a HELOC. Just realize that this does put your home at some risk. Make sure that you can make the payments. I think I like a HELOC better than a pure loan, as it is there only if/when you need it.
System Administrator / Investor · Eugene, OR · Member since 2015 · 144 posts · 29 votes
10y
@Sarah Byun. Be aware that some conventional lenders will not let you use borrowed funds as your down payment. You may have to season the funds in a checking/savings account for at least 2 statement cycles.
Flipper/Rehabber · Pittsburgh, PA · Member since 2014 · 144 posts · 21 votes
10y
If you can qualify with regards to DTI, you should have no problem utilizing a HELOC to close another property. Since the HELOC is actually 'your equity', it is not treated the same as other borrowed funds (like an unsecured personal loan or credit card). Consult with your loan officer though as some lenders may apply an 'overlay' and might have rules against allowing this. That said, generally speaking about guidelines, you should have no problem using your HELOC to help you close the purchase of another property.
Real Estate Agent · Mahwah, NJ · Member since 2015 · 7 posts · 1 vote
10y
Curious to know if anyone recommends (for or against) using equity as cash to purchase outright? Cash for down payment and HELOC as a means of borrowing from yourself.