Buying Apartments Using HELOC for Down Payment?

Question

Quick question... I have a HELOC for around $200k on my primary residence and have the tools/team in place to syndicate. However, I'm wondering if I can pull the HELOC funds to use as a down payment on an apartment deal? How would a lender look at this?

Thanks for your help!

Tamar Mar · Answer

Account Closed said above - keep an eye on your DTI and assume worst case scenarios before deciding if you want to use your HELOC.

We have used our HELOC to pay "cash" for 4 SFH on auction, and then turned around to REFI them 6-9 months later.  I am also using it for a syndicated deal I'm putting together on MF.

If a bank does require "seasoning" on the funds, you can take the required funds and put them in your checking account at least 2 months before closing.  Banks will only require 2 months of statements, so if the funds have been in there for that long, they will not ask where they came from (in most cases).  Alternatively, if you have transferred the funds over within the last 2 months and see an $50k deposit, they are required to find the source.

Good luck!

Account Closed · Answer

Thanks Tamar, that's very helpful!

Account Closed · Answer

Thank you all for sharing your experience and expertise, much appreciated!

Frank Chin · Answer

Depends on the lender and circumstances.

I won a bid at an auction, and the deal is the REO bank provides me with a 90% mortgage. I already paid $6,000 cash towards the deal. I had to come up with $14,000 more, and advised them it would be from my HELOC. They said no, it was to be from seasoned funds.

We've done REI with my mother-in-law and my wife had a joint account with her for many years, with balances exceeding $50K. So we showed them that bank statement, and it was a go.

The irony was when we showed up at the closing, they didn't require certified bank checks, so we just paid with checks for our HELOC.

From time to time, we encountered such problems with funding from HELOC, but our workaround is our mother-in-law account.

Ken P. · Answer

In the case of the apartment building we bought, which was not finanaced by an all new loan but rather by the assumption of an existing loan, the local bank had no problem with part of the funding for our down payment coming from a HELOC.

Andy Schwaderer · Answer

Recently did this myself. Seems most lenders assume worst case--that you'll max out that credit line anyway.

As long as your DTI can handle that heloc payment you should be fine. I'd bake in a little extra though, since it's tied to your primary.

Will Chamberlin · Answer

Depends on the lender but I have had no issues doing this over multiple transactions.