Using HELOC as down pmt

5 Replies

Are there any rules against using a HELOC as a downpayment for a conventional, Non FHA loan? Or would it be better to use the HELOC as money in the game for a private lender or hard money lender and then refi with a traditional loan? This would be the first property. Thanks.

@Julie Walker I’m exploring this option too. I got a confirmation today from a lender that I can use a HELOC to secure a construction loan or a commercial loan. I think you can use it for a conventional mortgage as well but I haven’t gotten that confirmed.

Julie,

Typically you can utilize a HELOC, but you will need to source and season those funds. The payment would also be included in your DTI calculation, so you would need to make sure it still qualifies. Different programs require different qualification hurdles.

I don't know all of the details of your situation, but if you are buying a rental that needs renovation it is typically better to use a private or hard money lender and then refinance.  Using this method you are using capital from the lender in lieu of locking up your own or dipping into equity from your primary.

Thanks to you both for your insightful replies. My thought was that I would use a portion of my heloc (20-30K) and either get conventional, private, or hard money for the rest. BRRR it with a refi that would pay off the heloc. But, if I finance with a conventional loan, not sure it would make sense to refi right away and then would have to carry the heloc too, risking my primary residence. So maybe using private or hard money would be best for the first deal.

@Julie Walker what did you end up doing? Im new to real estate investing and looking at using HELOC on my primary home as downpayment to buy second property. But Im not BRRRR, im buying turnkey. Wondering if you did get a HELOC or private money? Thanks