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HELOC used for new home

I have $3k in equity from my current home, so instead of a mortgage I have a HELOC with $160k available for withdrawel.I want to move to a better place, and my goal would be to withdraw $100k from the HELOC and use that towards the down payment of my new home for a traditional mortgage. Once moved in, I'd put my current place on the market and use the money to pay a large part of the new home.Is this okay? by tyson._222_693 from Helena, Minnesota. Oct 14th 2011 Reply


Steven Brand (stevenbrand)
#3 ranked lender in Minnesota - 121 contributions

Do you mean $300k equity? If you want to purchase a new home and you have a $160k HELOC on house #1 the underwriter who is going to be reviewing your file for a new purchase on house #2 has to ASSUME that the full $160k is taken out and use a payment on that ALONG with your other debt and the new housing PITI payment for you to qualify. So if you have a ZERO balance on that HELOC or take the full amount out... you'll have to qualify either way. If you qualify with all payments... you can do something similar to what you're asking about. We have a 30 yr FIXED rate loan availalbe where you could put the CASH from the sale of house #1 into it and have the loan RE-AMORTIZED on the new / lower balance. I hope that helps.Steven Brand... iLoan

Oct 14th 2011
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Shon Atabaki (ShonAtabaki)
#49 ranked lender in Washington - 95 contributions

To add to Steven's response, be sure that you shop around to determine how the new lender for your new home purchase will calculate the payment on the portion of the HELOC that is not drawn, as that can vary significantly & could impact you ability to qualify for the new home purchase.You should also double check to see what kind of early termination fee may apply when you close the HELOC upon the subsequent sale of the existing home.

Oct 14th 2011
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,784 contributions

The quick answer is YES. Generally speaking, you CAN DO what you are proposing. There are a lot of little rules that need to be understood to make sure it all works properly... way too much to be dealt with here. Contact a MN based direct lender like myself, and let them take an application, review your situation, and make sure it will all work for you. www.MnBestRates.com

Oct 15th 2011
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