HELOC as DP to Purchase Investment Property

[Luke Walker]

I am looking to use a HELOC on my PR to use as the DP on a new investment property. It will be my first, and I wanted to see if anyone knew - will the proposed interest payments on the HELOC funds be calculated into my DTI for the investment property purchase?

For example, if I am using $100k in HELOC funds for DP, will the roughly $500 interest payments be calculated into my qualifying DTI?

Any feedback is super appreciated! 

[Jason Wray]

Luke,

When the lender is underwriting the loan they will calulate the full PITI payment not just the interest only payment. They will ask for a copy of the terms and conditions and add in principal and interest based off of the full payment. Keep in mind you also cannot use any of the HELOC funds for the PITI reserves required which is typically 6 months PITI.

These are two exmples of why cash out refinance is a better way to go over the HELOC.