RE Investing using HELOC in Texas, any issues?

6 Replies

Couple of questions on HELOC in Texas.

1. In Texas can we use HELOC on primary residence to buy investment properties?

2. In Texas, can we use HELOC on investment properties to buy more investment properties? OR somehow use the investment property a collateral for a loan.

@Soujanya Masna

  1. Yes
  2. Yes!

Since a HELOC is a variable interest rate, if you use it to BUY an investment property, we then REFINANCE that investment property to pay the HELOC back. Using the BRRRR method to do this is the most common method. Let us know if you have any other questions on it. Thanks!

@Chris Mason thanks for the mention!

@Andrew Postell Happy New Year. Your feedback is appreciated but I recently contacted my mortgage broker asking the same question and here was the answer. The underwriter is requiring 6 months worth of mortgage payments in reserve for the investment property as well as my primary residence unless I can show I have those funds in my bank account, which I don't, that's why I'm using the HELOC. In addition to the reserves, once I close on the investment property, I would have to close the HELOC! Apparently these are Federal Regulations. Can you confirm the above and suggest what else I can do to purchase my 1st property? Thank you.

@Marvin Lusky sorry for the confusing information here. The reason why you have so many different answers to these types of questions is that some lenders won't offer the same loans as others. It's difficult to tell if you are a customer though. That's why it's really important to work with a diverse, investor friendly lender. So how can you tell? I have a list of questions below that will help you know. The lender that you spoke to is giving you a FANNIE MAE answer....FREDDIE MAC will not require that much in reserves. Unfortunately, not every lender will offer BOTH loan types. And some of the larger lenders will underwrite their loans to the more CONSERVATIVE agency...yikes!

Also, I'd probably want to talk through your scenario a little. It sounds like you are buying a property with a conventional loan? Meaning, not doing the BRRRR method? I might suggest a different strategy to think about if that is the case. But here's the list of questions I wrote for investors to ask their lenders to see if they are investor friendly or not:

Questions for Lenders

  1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
  2. When do you start using "After Repair Value" on my property? (also should be immediately)
  3. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
  4. What is my minimum down payment required? Minimum amount of equity required in a refinance? (if they only require 15% on a single family home that is usually a good sign that you are working with a flexible lender)
  5. How many loans can I have with you?
  6. Can I change title to my LLC?
  7. Do you sell your mortgages?
  8. What is your loan minimum?
  9. Can you explain to me what your reserve requirements are?

Hope this helps!

Thank you so much for your explanation and advice. The list of questions is priceless!

I already used them today to screen out another lender. Any lenders you might recommend in Michigan?