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Old 08-26-2014, 04:14 PM
 
Location: Sacramento, CA
14 posts, read 13,044 times
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Hi,

Does anybody knows a bank / lender which offers a HELOC which can be used as a down payment on a new house. I basically need the HELOC to bridge the time gap between buying the new house and selling the current house. BoA doesn't allow to use the HELOC to buy a new primary residence.

Any thoughts?
Thanks
Markus
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Old 08-26-2014, 04:34 PM
 
Location: El Dorado Hills, CA
3,724 posts, read 8,837,271 times
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Ask about a bridge loan. Essentially the same thing but handled differently for New house purchases. I will send you a DM.
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Old 08-26-2014, 08:01 PM
 
Location: Southern California
4,453 posts, read 5,750,408 times
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Will your income support both mortgages?
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Old 08-26-2014, 10:00 PM
 
Location: Sacramento, CA
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Yep, depends how you see it: mortgage and bridge loan no problem on the current home no problem, mortgage on the new house after 6 - 9 months - ouch.
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Old 08-26-2014, 10:43 PM
 
39 posts, read 48,624 times
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Quote:
Originally Posted by NinaN View Post
Ask about a bridge loan. Essentially the same thing but handled differently for New house purchases. I will send you a DM.
From everything I've read, and all the loan agents I talked to when we were shopping for a new house, bridge loans are a lot harder to find nowadays. That's not to say impossible, but nobody I talked to really wanted to deal with them.

Getting a HELOC on your current house can be a good solution, with some caveats:

1) You'll usually be limited to 70%, maybe 80% of the appraised value of your current home, minus the current mortgage.

2) The appraisal can be particularly harsh, since there's no contract price to justify or not, just what you say you want it to be worth. Our first (free) "desktop appraisal" came back about half of what we think it could sell for, and when the same appraiser came for a $300 visit, he brought it up to about $50k short of what we had asked for. With the 70% limit, that cut the amount of the credit line available.

3) You should get the HELOC set up before the house is on the market -- many lenders specifically won't issue one for a house that's being sold. Our underwriters at some point had the agent ask us for the purpose of the loan, but it sounded more like a regulatory-required question (like when your broker must now ask your risk tolerance for a new account). Since we were just starting to look at new houses and weren't under contract, I could truthfully say it was for "available cash/spending", because we might well have chosen to spend it on something else. YMMV.

4) The mortgage lender for the new house *should* be able to treat the entire HELOC line the same as cash in the bank for downpayment verification, but they will take the interest rate/payments into account on that max (along with your old mortgage) to determine qualification for the new one. It took us over a year to find a house after the HELOC was open, so I don't know what aging requirements there are.

Another alternative is to refinance your current house to cash out equity; you might be able to get 80% or more that way, but that has its own risks and caveats of course.

Try local banks and credit unions (it's often very simple to become a member), and some of the nationals like Capital One.
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Old 08-27-2014, 07:47 AM
 
Location: Sacramento, CA
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Thanks for the input, let's see where it will end.
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Old 08-27-2014, 12:07 PM
 
1,321 posts, read 2,308,866 times
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Quote:
Originally Posted by jbmcd View Post
2) The appraisal can be particularly harsh, since there's no contract price to justify or not, just what you say you want it to be worth. Our first (free) "desktop appraisal" came back about half of what we think it could sell for, and when the same appraiser came for a $300 visit, he brought it up to about $50k short of what we had asked for. With the 70% limit, that cut the amount of the credit line available.
Ouch. That seems like something that can happen in a lot of neighborhoods in the city. Our desktop review for our refi back in 2011 or 2012 had the same problem. Guy pulled up sales within two miles of Curtis Park, which gathered up a big helping of Oak Park sales and made our appraisal laughably low. Even the paid appraisal was pretty low, due to what the nearby sales happened to be at the time, but we still squeaked through for the refi.
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