This is the same strategy I used to get into a better primary residence for my family and add our first property to our portfolio.
I put a Heloc on my primary, pulled out the DP for our new primary house from that heloc. I was able to grab a conventional 30 year on a 255K house with 20% down. The entire DP was from the heloc on our primary residence at the time. It was tricky though, they bank was not thrilled with where the DP was coming from. What did help was that I had good credit, great work work history and good income. They absolutely figured in my heloc payment into the equation.
My broker was good and was able to structure this well so things looks as good as they could to the bank. but YES, traditional lenders are VERY interested with where the down payment comes from.
If it's anything other than good old fashioned saving, then be prepared to prepare statements, letters, explanations etc.. It's not impossible obviously but is much more effort. At the end of the day if your DTI, job history, credit scores, employment history are good, you are probably going to be able to make a non-traditional source of DP work.
IMO, and it's just MO, I would exhaust all efforts to use a traditional mortgage. Rates are so low and the process is pretty straightforward. Save the creative financing for when you have no other options. I have a feeling you still have options to go traditional.
