Just applied for my first commercial loan, HELOC question!!
So I am in the early stages of applying for my first commercial loan. I just got a 5 unit multi family under contract yesterday, and I want to make sure I take the best steps in order to give myself the best chance of getting approved. I currently have $75,000 cash to put down on a 75%LTV commercial loan with a purchase price of $385,000. I have a $105,000 HELOC available to me and I plan on tapping into some of it to help fund the rest of the down payment along with closing costs. I wanted to use the rest of the HELOC to fund the rehab project, and in a couple years I plan on refinancing cash out at the properties higher NOI. My question is this: Would it be better to just tell the lender up front that I plan on using the HELOC to help fund this deal, or pull the HELOC out as cash and let it sit in my bank account while I apply for the loan? Which way looks better for an underwriting team? Or does it not matter either way? I plan on asking the lender tomorrow but wanted to make sure I'm not missing something. Some other information: This will be a recourse loan, my credit is good, DTI ratio is about 13%, and I have an additional $200,000 sitting in a 401K account. Lender says I'm strong, however since this is my first investment property and I'm out of state, it could be a little tougher to get the approval.
Look forward to reading your responses, thanks guys!
Most Popular Reply
@Rich Somers I've had clients pull out cash from a HELOC, and as long as the cash was sitting in their account prior to the loan application, all went well. I can't imagine any lender asking you to provide an audit for your cash reserves.
If you show them your account today, and your balance=X, then a week later you have an additional $100,000 in there, then they may ask questions.
Depending on your relationship with the lender, maybe ask for his opinion "off the record?"