Last year I contacted my credit union and got a HELOC out for investing. It cost me a grand total of $250 and included an appraisal. I recommend that you begin the process now so that you have it ready when the time to strike presents itself. It should fund into a checking account and can sit there unused. You can use a check for your (EMD) Earnest Money Deposit and then another one for your down payment.
You probably already know, but you'll be allowed to take up to 80% LTV in most cases. This means that if your house is worth 100K and you have a mortgage of 45k, then the bank will approve you for 35k. 45 + 35 = 80. 80/100 = 80%
We have the HELOC and are also saving as much cash as possible. I highly recommend reading, the Richest Man in Babylon. Disponible en espanol ;) I'm of the mindset that a market correction is coming and I want to be correctly positioned to take advantage of it. I am also currently making offers, but at a price that protects me from any such correction.
Well, depends on what type of HELOC it is and will the lender let it be secondary, and if the HELOC will agree to be re-secondary (Not official term). If it does not have a payment which is $0 depending on the lender it should not count towards your DTI but will be calculated in CLTV. If it has payment it will count towards your DTI, and CLTV. Yes you can refi with a HELOC and not even close the HELOC but it depends on many factors and the lender. Not sure what state you are in but find a Mortgage Loan Originator to help you! I am in Florida.
@Arlen Chou When you say you should "season the property and then get a stand alone loan to pay down the HELOC", how long are you talking about? Trying to figure out how to rinse and repeat the process as quickly as possible. I guess my questions is after the initial purchase, if you go the cash out refi route, you still have to put down 20% for that refi, so how is there enough cash to pay down the HELOC? or are you letting it season long enough to build up +20% of Equity?
@Matt Dello Russo the process takes at least a year. Typically, banks will not re-evaluate the value of properties in less time. I have heard of 6 months, but I have never done it that quickly. In my case, I had strong market and forced appreciation working on my side. Essentially, I was able to let both types of appreciation help me past the 20% level so I could pull most, if not all of my initial money out of the property in one swing. Basically, you have to be in an appreciating market to use this strategy.
Great Discussion here. I was reading through the comments, but couldn't find the answer to this question. Could you get a HELOC on your primary residence, move, turn that primary residence to into a rental, then the second property would be our "forever home"?
Sorry for the confusing question, let me go into more detail. My wife and I love the idea of investing in real estate so much that our first home we bought was a single family home that we planned to rent out. We have almost completed all the major renovations for this property (only the kitchen to go). My wife is pregnant and we are looking to settle down a little bit (we still plan on turning our first home into a rental property). Is it possible to get a HELOC on this property and use it on a home we intended to stay in?
@Trenton Dwaine Cottrell the short answer is yes. The HELOC will stay in place after you move and convert to a rental (in most cases). Banks typically don't have the time to reassess their portfolio of loans, but you always need to read the fine print. Risk is very low here IMHO.