Philadelphia, PA · Member since 2017 · 140 posts · 37 votes
I have heard so much about people successfully using HELOC as a down payment for investment property. Decided to do the same. We owe 95K on our primary residence, wich is valued around 200k. Went to the bank today, the same one which we have our mortgage with. Before applying I decided to ask if I could use the HELOC for down payment on an investment property. Here was the answer " Technicaly, if you were to disclose to us that you are going to use HELOC for investment purposes our rules are that you can't use HELOC for that"
So here is my questions. How do you interpret that answer?
I interpret that answer as "It's only a problem because you're yapping about it!".
It is technically against the rules for most larger banks, as it can cause some lenders to worry as downpayments are supposed to be cash to increase equity, using borrowed funds defeats this purpose. That said, no one cares what you use it for as long as you meet underwriting requirements. No one will say anything if you don't and it's done every day.
@Brent Coombs and others....I was one of the people suggesting that LOC proceeds be taken out and banked, at interest, long enough for it to not appear on the last two statements.
Your individual experience may vary, but in a conversation with my mortgage broker last week, he - and his underwriting expert, in separate conversations - cleared up the process:
They (again, YMMV) don't care if the down payment comes from the LOC. They would prefer to see it transferred out of the LOC early enough for the payment to show up on the credit report, to make for easier underwriting funds tracing, but showing/proving the transfer, the new balance, the interest rate, and the monthly balance will suffice.
The new monthly payment on the LOC will be added to the DTI calculation, so you need to have some overhead clearance there. Normal cash reserve requirements, etc, still apply.
I can't stress enough that you need to talk with your own lenders, but generally if one lender can do it there is at least one other lender out there that can also do it this way.
Bottom line (tl;dr):
a) my mortgage broker doesn't care if the down payment comes from a LOC
b) I don't have to hold tens of thousands of dollars at interest for 2+ months in anticipation of using that as a purchase money down payment.
Once more, your mileage may vary.....
@Brent Coombs and others....I was one of the people suggesting that LOC proceeds be taken out and banked, at interest, long enough for it to not appear on the last two statements.
Your individual experience may vary, but in a conversation with my mortgage broker last week, he - and his underwriting expert, in separate conversations - cleared up the process:
They (again, YMMV) don't care if the down payment comes from the LOC. They would prefer to see it transferred out of the LOC early enough for the payment to show up on the credit report, to make for easier underwriting funds tracing, but showing/proving the transfer, the new balance, the interest rate, and the monthly balance will suffice.
The new monthly payment on the LOC will be added to the DTI calculation, so you need to have some overhead clearance there. Normal cash reserve requirements, etc, still apply.
I can't stress enough that you need to talk with your own lenders, but generally if one lender can do it there is at least one other lender out there that can also do it this way.
Bottom line (tl;dr):
a) my mortgage broker doesn't care if the down payment comes from a LOC
b) I don't have to hold tens of thousands of dollars at interest for 2+ months in anticipation of using that as a purchase money down payment.
Once more, your mileage may vary.....
Good idea. I used a mortgage broker before. I wonder if he knows the requirements of that lander that he gave me. Will sure ask him how much time do they need for HELOC funds to be seasoned in my account.