Convention loan or LoC to buy rental property

3 Replies

Hey all,

Any feedback is appreciated. 

In the process of buying my first rental with a conv. loan. Purchase price is 62k and dp is 15%. I'm fairly certain I can get approved for a 50k LoC at my bank. I'm trying to understand if that's the better option. The down payment for myself is similar for both scenarios, but with the LoC I dont have the loan closing costs. I'm assuming for many of you the main factor for this decision would be what the ARV is. If its not high enough for a refi to make sense, would you just keep the conventional loan financing and forego the refi? Conversely, if it is high enough to pay off the LoC and give me some cash back, isn't that the correct play?

For example, even if it only appraised after rehab at 80k, I can get a 64k refi on it and cash out well over 10k. That won't be all the money I have in it, but most of it. If I'm confident the ARV is 80k or higher, do I go LoC buy then refi route?

Thanks!


@Jordan Ashabranner

Not necessarily... a loc from your bank isn't a mortgage/loan. Meanwhile, conforming residential moans have their fixed criteria, which lenders can choose to be stringent. Meanwhile, your local bank may choose to lend off their own books and thus originate for you a nonconforming loan. It all depends...

I really wouldn’t worry about what a public forum says about your loans... it really depends on what loan products you can find and qualify...

Good luck.