All Forum Posts by: Zack Karp

@Thomas J Mele you're getting some bad advice here.  You ABSOLUTLEY CAN use your heloc for down payment on another property for a Conventional loan, because it is SECURED borrowed funds.  Unsecured borrowed funds are what's not allowed.  You do not need to stick it in the bank for 2-3 months first.  However, you WILL need to liquidate those funds prior to the purchase, and be able to show what the new monthly payment is on the heloc for underwriting, before you can get final loan approval.

Be sure you are getting advice from a mortgage professional, not posts from non-LO's.  This is definitely a stay in your lane situation.  No offense to the posters here...

Also a 203K loan is a FHA loan, which can only be used on a primary residence.

Best of luck!

I think the first question here is that we don't know if we are talking about a 1-unit property, or a 2-4 unit property.

@James Woods here are your options:

1. You can buy another primary residence 1-unit property with Conventional financing with 5% down.  (3% down is either for 1st time homebuyers, or if you can qualify for Home Possible or HomeReady, which both have an income cap that may be unlikely to meet carrying 2 properties, but something to look into.)

2. You can buy another primary residence 2-unit property with 15% down.

3. You can buy another primary residence 3-4 unit with 20% down.

4. You can refinance your existing property out of FHA into Conventional, and free up your FHA eligibility to buy another primary residence 1-4 unit with 3.5% down. In order to do this, since this property is now an investment property, if your existing property is a 1-unit, the max LTV is 85%, and if it's a 2-4 unit, the max LTV is 75%.

Hope that helps.  Best of luck!

@Jaden Huff congrats!  Hopefully your loan officer mapped out your exit strategy on this property, so that you are prepared for property #2 and don't get stuck in property #1 longer than you are expecting!

Best of luck!

^^^ Bingo :)

There are a few banks that were doing them (First Midwest @Michael Barbari is here on BP), then Covid hit and many of them suspended doing them. I think some have returned? Usually though, helocs on investment properties need to be in 1st lien position, and I suspect at a max LTV of around 75%. This is not the same thing as getting a heloc as a 2nd lien behind a primary mortgage at a high LTV like on a primary residence.

Best of luck!

@Tim Sipowicz sounds like a hard money loan.  For the right situation, that can work, if the numbers can absorb those higher costs.  But my BS-meter is on high alert when that is being advertised in a listing.  Could be a hidden agenda.  Or perhaps just a friendly realtor/seller trying to help.  You'll need to do your diligence, just like any situation.

Best of luck!

@Shivam Patel buying as an investment property and living in the property is actually called reverse occupancy fraud.

I think you are confused, Conventional loans can either be a primary residence or investment property (or second home where you actually occupy part time).  So we are talking about Conventional investment property loans here, they are one in the same.

There are other types of investment property loans that are not Conventional, and they come with worse terms...higher rates, etc.

@Shivam Patel yes you can purchase a new primary 4-unit after your 1 year is up.  You would need 20% down though with Conventional.

Otherwise, you could refinance your existing property to an investment property Conventional loan, which if it's a 2-4 unit property, you would need 25% equity (75% LTV max). That would free up your FHA eligibility to put 3.5% down on the next property.

And if you are refinancing to an investment property, you can do that at any time, because paying off the existing loan satisfies the Mortgage, so you don't need to wait out the full year. Then you could buy with a new FHA loan right away.

You might need to pay down the existing loan to get to 75% LTV if you don't have enough equity. But that might be smarter than putting 20% down on a new property. I don't know your numbers, you would need to weigh the cost of paying it down vs. putting down an additional 16.5% on the next property.

Hope that helps.

@Shivam Patel it's very simple. Any loan for a primary residence...whether it be a purchase or refinance, whether it's Conventional, FHA, or VA...you will be signing a legal document at closing called a Mortgage, that states you are going to occupy for 1 year.

If you are looking to refi from FHA to a new primary residence Conventional loan, that starts the 1 year clock over again.

If you are intending to not live there for another year, and you did the refi as a primary residence, you are committing mortgage fraud.

Your lender is doing his job and letting you know the law.

Best of luck!

@Scott Logan yes you can do a FHA streamline on an investment property. No you cannot take cash out.