203k or conventional using HELOC on other home?

Question

I own a home outright and am in the process of buying another using a loan. Was going to do an FHA (thus living in the property with the loan), but the bank will not do it because the roof needs to be replaced. I'll either have to do a 203k loan (lots more appraisals and inspections to pay for) or a conventional (taking some money out of the paid off home for closing and repairs).  Which should I choose? If I go with conventional, is it better to live in the paid off house or the house with the loan?

Brent Coombs · Answer

@Dana Graepel, nice to have options! My instinct tells me you'd still save money going with an owner-occupied 203k rather than taking out an Investment loan.

#1: Owner-occupier Interest Rate and loan length are both likely to be more favorable.

#2: Only ~3.5% deposit needed for owner-occupier loan, vs 15%+ for Investment loan!

#3: I suspect that having your own Deposit will be cheaper than a HELOC. But, check! My 2c.

Lana Lee · Answer

Some Landers will do up to 90% HELOC. Do you think that will be enough for down payment and repairs needed after closing ? I believe most Landers require closing costs to be paid out of your own cash not HELOC. And make sure that prospective HELOC monthly payments will not over increase your DTI ratio and that your mortgage lander will be OK with that. When shopping for HELOC don't mention that you intend to use it as down payment as most Landers will not give you HELOC for that purposes. It is possible to get a fixed rate HELOC product. We just got 3.99 fixed rate , 3 years draw period with 10 years Amortization. And hope it's a good deal .

Dana Graepel · Answer

or, refinance the house, and by the "new "house" out right...