Appropriate HELOC usage

[Boris Alayev]

I am in the final stages of a HELOC closing. All is approved just need to get the papers signed and sent back. I am also in the middle of my first investment properly closing (waiting on appraisal completion and closing date schedule).

For those who have used the HELOC to buy properties, rehab and refinance them with either a commercial loan or conventional, do you draw the HELOC money and keep it in the accounts for 3 months before use? I ask because it is common for lenders to ask for 3 months or so of banking checking/savings statements. And when they see 100k deposited into the account they start to ask questions. My understanding is banks are not happy when you use a HELOC with a variable rate to put a down payment on an investment property.

What is the correct approach here? 

Thanks in advance.

[Perry Farella]

One thing to consider is that when a bank sees a HELOC balance on your credit report, regardless of how much you have used and taken out, they will calculate a future payment on worst case when qualifying you for a mortgage. Meaning that they will usually take a 1% monthly payment given the interest rate will vary in the future with most HELOCS. So if you have a potential HELOC showing on your credit report of 50,000 max available but have used only 20,000, most lenders will , on a mortgage application , see that 50,000 potential and use a payment of 1% of that or 500.00 a month. Even though your interest only payment may be currently much lower.