HELOC for down payment

[Michael H.]

My personal home is paid off and I am looking to obtain more rental property. I have a HELOC (I am going to switch back to an interest only loan) but all of the bankers I have talked to say I can not use it as a down payment for another mortgage to obtain another buy and hold.

I have used an interest only loan to purchase, remodel, and sell a flip.

What do I need to know?

TIA

[Chris Teti]

hi MIchael, each lender is different. Traditional mortgage companies tend to be the strictest with stuff like that. The problem with a HELOC is that is reports to your personal credit profile, so everyone can see it and how much you are using it. I prefer a business line of credit that is not tied to any particular asset and doesn't show up on your personal credit report. My HELOC is used as a backup plan in case I need some additional funds once I have the property.

[Michael H.]

Thanks @Chris Teti. What are typical requirements to receiving a LOC?

[Chris Teti]

@Michael H. It really depends. There are different types of LOCs that each have their own criteria such as length of business, revenue, partner situation, personal credit, etc etc. 

[Brian G.]

@Michael H. I just did this, ie I used my Heloc as a down payment on a recent purchase. Time to find a mortgage broker or a more investor friendly banker, lender, etc.

[Kerry Baird]

If you take a cash draw and set it in another bank account to season, this cash for down payments may be looked at differently.  The key is to not draw too much, as it will affect your debt to income ratio.  

[Doug Pintarch]

Originally posted by @Brian G.:

@Michael H. I just did this, ie I used my Heloc as a down payment on a recent purchase. Time to find a mortgage broker or a more investor friendly banker, lender, etc.

 This.   Keep making phone calls.  If you have excellent credit it won't take long to find a lender who won't care as long as your numbers are in line.  

[Suzette T.]

Originally posted by @Michael H.:

My personal home is paid off and I am looking to obtain more rental property. I have a HELOC (I am going to switch back to an interest only loan) but all of the bankers I have talked to say I can not use it as a down payment for another mortgage to obtain another buy and hold.

I have used an interest only loan to purchase, remodel, and sell a flip.

What do I need to know?

TIA

How many lenders have you spoken to? In our experience different lenders have different requirements - and some don't even require seasoning on the HELOC funds. Shop around! Finding a lender who does flips and holds investment property has been paramount for making our dreams into realities.