What bank will allow me to use a HELOC as a down payment?

[Thomas J Mele]

I'm trying to find a lender that will allow me to use the HELOC on my primary as a down payment for a new investment. Also, would a 203k loan be an option if I'm using credit to obtain the property?

[Joe Splitrock]

Originally posted by @Thomas J Mele:

@Todd Rasmussen

I'm a bit confused. I was advised that I could use the HELOC to purchase another property. I looked into this throughly before I applied

You can use a HELOC to purchase a property, but what you said is using a HELOC as a down payment. Conventional loans have a provision that down payment cannot come from borrowed funds. The concern on an investment property is that the property is then 100% leveraged. The entire reason the bank doesn't lend 100% of value is to avoid it being 100% leveraged. As Todd mentioned, you can put that money in your bank account for 2-3 months, then when the bank asks for your last two months bank statements, it will show the money in your account. The source of down payment is then cash from your bank account, not a check from your HELOC. I know it sounds like splitting hairs, but that is generally how it works. You may find a commercial lender who doesn't care what the source is because technically the down payment is secured against the HELOC property, not the property you are buying.