Issues with HELOC financing?

[Page Weil]

I have about $200k in HELOCs and used them to make a cash offer on a property and then I can refinance into commercial or traditional mortgage after shopping around a bit.

I have run into a problem with underwriting a couple of times now. My loan officer hasn't told me the exact rule, but essentially they are asking whether I bought the house with cash or with credit. They need to make sure their refinance goes towards paying down the credit. Since the HELOCs are just part of my normal banking, there is not a way to guarantee that their refinance will go to the HELOC and not just to my checking account. I have had this conversation with a commerical and a traditional lender now and it could be a deal breaker for the refi.

I thought using HELOCs for financing would help me make deals easier, but this is being a headache. Anyone else have a similar experience in have strategies to use HELOCs to optimize their investment property purchases?

[Shaun Weekes]

Originally posted by @Page Weil:

I have about $200k in HELOCs and used them to make a cash offer on a property and then I can refinance into commercial or traditional mortgage after shopping around a bit.

I have run into a problem with underwriting a couple of times now. My loan officer hasn't told me the exact rule, but essentially they are asking whether I bought the house with cash or with credit. They need to make sure their refinance goes towards paying down the credit. Since the HELOCs are just part of my normal banking, there is not a way to guarantee that their refinance will go to the HELOC and not just to my checking account. I have had this conversation with a commerical and a traditional lender now and it could be a deal breaker for the refi.

I thought using HELOCs for financing would help me make deals easier, but this is being a headache. Anyone else have a similar experience in have strategies to use HELOCs to optimize their investment property purchases?

You can use a HELOC and then refinance using the delayed financing rule. If you took 100K from each HELOC and you do a cash out refinance for 250K here is the breakdown.

100K goes to HELOC number 1

100K goes to HELOC number 2

50K goes wherever you want it to go

You have a record of the draw used to by the home cash, so this is an easy fix. The problem you're having is that your Loan Officer or Broker isn't versed in delayed financing most likely.

Get your draws and show that the money came from a HELOC. This is 100% acceptable if your lender follows Fannie guidelines and doesn't have any OVERLAYS.

Also, note that the Underwriter will treat both HELOC as though they have been maxed out for DTI purposes. I hope your Loan Officer put that into the equation before executing all this.

I hope this helps.