HELOC to Get a Conventional Loan

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HELOC to Get a Conventional Loan

Joe Bostick
Investor · Washingtonville, NY · Member since 2018 · 10 posts · 2 votes

Hello! I'm looking to buy a SFH in NY within the next couple months. I plan to live in the house for 2 years before eventually renting it out. I can easily set aside 10k to use towards a down payment. Houses that I'm looking at in NY are around $350k.

I have a rental house in Texas with about 56k in equity that I bought using a VA loan. I have a rental house in Virginia that has about 18k in equity (also bought with a VA loan).

This will be the first time I buy a house without a VA loan and I just wanted to make a good decision on financing. I've been reading quite a few articles on HELOC and home equity loans and from what I understand is that HELOCs and home equity loans may be a good option over FHA loans because I'll avoid having to pay PMI. It doesn't look like I'll be able to make a 20% down payment unless I use a HELOC or home equity loan.

Would it be wise to use a HELOC to augment the $10k I currently have to get to the 20% down payment required for a conventional loan? Any suggestions on how to purchase a $350k house for someone in my situation?

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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    8y

    @Joe Bostick, are your two rentals cash flowing consistently? If so, shouldn't you have more than $10k saved up? If you want an FHA or conventional owner-occupier loan, you'll need more than $10k to cover the minimal 3.5-5% deposit for your next $350k primary.

    While in theory, 2x Equity Lines Of Credit could be approved, remember that Lenders only give out a percentage of the homes' values, so, you may not have $74k of borrowable equity!

    On the face of it, you've taken good advantage of the zero down borrowings available under VA, but, it looks to me like it's time to be a responsible saver as well? Thank you for your service...

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  • Joe Bostick
    OP
    Investor · Washingtonville, NY · Member since 2018 · 10 posts · 2 votes
    8y

    @Brent Coombs I made the mistake of using the cashflow to pay off principal on the mortgages and maximizing all Roth IRA and TSP contributions each year. Looking back, I should have held onto the cashflow to save up for a down payment for a future house. I can probably put down up to $20k, but I like having a little more liquid assets in the bank since almost every time I've received orders to move, I've had less than a month's notice and there are quite a bit of expenses in moving...However, since I'm "guaranteed" to be in NY for two years, I think I can afford to keep less money in my checking/savings accounts and put down a large down payment.

    I guess now the question is whether or not I can get the numbers to work using HELOC to get a conventional loan or to just use an FHA loan!

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