Does down payment from line of credit need to be seasoned?

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Does down payment from line of credit need to be seasoned?

Weng L.
Fort Lauderdale, FL · Member since 2019 · 94 posts · 16 votes

Does conventional loan lender allow you to withdraw money from personal line of credit or heloc as down payment of investment property ? or it has to be seasoned? Thanks

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Eric Veronica
Lender · Cleveland, OH · Member since 2011 · 588 posts · 438 votes
7y

@Weng L.  The key word here is "SECURED".  A secured line of credit (home equity line of credit) can be used as qualifying down payment as long as the line of credit is in your name.  An unsecured line of credit (credit card) cannot be used as a down payment.  

This answer assumes that you are looking for conventional financing. 

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  • Frank Chin
    Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    I gone through that. If I got a mortgage, and the down is from a credit line, they would consider the deal 100% financed, a NO NO. If it was seasoned for 6 months, it's OK.

    What we did was show them a joint account my wife and her mom had for 10 years, and they approved it that way. 

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  • Weng L.
    OP
    Fort Lauderdale, FL · Member since 2019 · 94 posts · 16 votes
    7y
    Hi Frank, 
    Why down payment has to be seasoned for 6 months? Lenders only check 2 month's bank statements, right?

    Originally posted by @Frank Chin:

    I gone through that. If I got a mortgage, and the down is from a credit line, they would consider the deal 100% financed, a NO NO. If it was seasoned for 6 months, it's OK.

    What we did was show them a joint account my wife and her mom had for 10 years, and they approved it that way. 

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  • Frank Chin
    Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Weng L.:
    Hi Frank, 
    Why down payment has to be seasoned for 6 months? Lenders only check 2 month's bank statements, right?

    Originally posted by @Frank Chin:

    I gone through that. If I got a mortgage, and the down is from a credit line, they would consider the deal 100% financed, a NO NO. If it was seasoned for 6 months, it's OK.

    What we did was show them a joint account my wife and her mom had for 10 years, and they approved it that way. 

    That’s what they want from me. Each bank has it’s own standards. Yours could be different. 

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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Weng L.:

    Does conventional loan lender allow you to withdraw money from personal line of credit or heloc as down payment of investment property ? or it has to be seasoned? Thanks

    A line of credit can absolutely be used for down payment on a conventional loan. The payment on the HELOC would have to be considered in the debt to income ratio of course and you will have to prove where the funds came from but it is an acceptable use of funds. If you lender is not allowing this it would be an overlay on top of Fannie/Freddie requirements.

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  • Eric Veronica
    Lender · Cleveland, OH · Member since 2011 · 588 posts · 438 votes
    7y

    @Weng L.  The key word here is "SECURED".  A secured line of credit (home equity line of credit) can be used as qualifying down payment as long as the line of credit is in your name.  An unsecured line of credit (credit card) cannot be used as a down payment.  

    This answer assumes that you are looking for conventional financing. 

    1Reply
  • Weng L.
    OP
    Fort Lauderdale, FL · Member since 2019 · 94 posts · 16 votes
    7y
    Hi Eric,
    Is this a fannie mae guideline?
    I asked my broker and was told that personal line of credit is ok (It is unsecured).
     
    Originally posted by @Eric Veronica:

    @Weng L.  The key word here is "SECURED".  A secured line of credit (home equity line of credit) can be used as qualifying down payment as long as the line of credit is in your name.  An unsecured line of credit (credit card) cannot be used as a down payment.  

    This answer assumes that you are looking for conventional financing. 

    0Reply
  • Eric Veronica
    Lender · Cleveland, OH · Member since 2011 · 588 posts · 438 votes
    7y

    @Weng L.  Yes. 

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