bethel, CT · Member since 2015 · 335 posts · 57 votes
Hello BP, is there any problems with taking a personal line of credit out and seasoning it in your bank account for a few months then using it for a down payment and rehab?
Example : I take 50k out on a personal line of credit.. I then take 20k of the LOC and put it in my bank account with my own personal savings of 25k. All together 45k now in my bank account plus 30k still in my line of credit. Next, let it season for a few months, then go another bank and apply for a mortgage loan planning on putting 25k for a down payment .
.is this ok?
@Ryan Keenan Sure it is, it is just going to cost you some money in the form of a high interest rate on the personal line. It will also affect your DTI for future loans.
No problem, but of course you have to disclose the line of credit, it will pop up likely on tour credit report anyway though. I’m guessing you want to “season it” so you wouldn’t have to disclose the loan......bad idea, loan fraud.
Well @Ryan Keenan I would have 10 to 30 banks in mind for your BUSINESS line of Credit because utilization trap will get you with personal lines of credit. I have been in groups where folks recommend to call the 10 banks all on the same day. Its up to you. Creating relationships with banks that every 90 days or every 6 months you call for credit line increases could work.
No problem, but of course you have to disclose the line of credit, it will pop up likely on tour credit report anyway though. I’m guessing you want to “season it” so you wouldn’t have to disclose the loan......bad idea, loan fraud.
thanks for your response, the loan would be disclosed and only be seasoning the 20k of the 50k loan I take out. So the bank would see I have a 50k line of credit oweing 20k on it already. That shouldn't be mortgage fraud if the bank sees it on my credit report.
Well @Ryan Keenan I would have 10 to 30 banks in mind for your BUSINESS line of Credit because utilization trap will get you with personal lines of credit. I have been in groups where folks recommend to call the 10 banks all on the same day. Its up to you. Creating relationships with banks that every 90 days or every 6 months you call for credit line increases could work.
@Ryan Keenan why season your line of credit in a bank account at all? I don't see any point to this. In your example you said you had 25k in your personal savings, and you planned on putting down 25k for a downpayment, and having a 50k line of credit. Why not just pay your 25k downpayment with your personal savings, or pull out 25k from your line of credit to pay with? Seems to me, that taking money out of your line of credit to 'season' it in your personal bank account is simply going to cost you money.
@Joshua Hardy
I’ve done this .. buying a home with a lIne of credit as “ cash” . As far as brrrr the banks I called say they don’t really care as long as I have the deed in my hand . That’s the collateral they want . Having it free and clear for them to hold is what they are looking for . Of coarse they look at everything in your personal financials and will find it and calculate negatively toward your debt income ratio
The problem you could run into is if you were borderline for the loan, then the borrowing against the line of credit could push you into situation where you no longer qualify for the loan, but you can't get the loan w/ out borrowing so you're stuck.
If your credit/DITI can float the difference then go for it...