Banks That Offer a HELOC to Cover the Down Payment on a Home

The Quick Read: A HELOC can fund the down payment on a home, but two separate approvals decide whether it works: the line lender approves borrowing against a property you already own, and the purchase lender decides whether borrowed money counts as acceptable funds for the loan that buys the property.

• On an investment-property line, combined loan-to-value (CLTV) tops out at 70%, with a 700 minimum credit score and a $500,000 maximum line, subject to lender guidelines.
• On a primary residence or second home, the ceiling reaches 90% CLTV, but only at a 720-or-better credit profile and on lines up to $500,000.
• At least 75% of the line is drawn at closing, and the line must be drawn before the purchase, because an undrawn line is not counted as cash.
• Borrowed funds are often accepted for the down payment and closing costs, but they are commonly excluded from reserves.

Which Banks Offer a HELOC to Cover the Down Payment?

The question assumes one bank does everything. It doesn’t. One institution writes the credit line, and a different lender writes the mortgage on the home you’re buying. The two approvals are independent, and either one can say no.

The line lender mostly cares about the property that secures the line, your credit, and your debt load. It doesn’t police what you do with the cash beyond the line agreement. The purchase lender is the one that reads your bank statements and asks where the down payment came from. That second reader is where plans stall.

Lender types differ in appetite, and the differences are worth knowing without naming anyone:

• Large retail lenders and depository institutions tend to run standardized products and set their own rules on how borrowed funds are treated in a purchase.
• Regional lenders and credit unions may price and structure lines differently, and a relationship can matter.
• Wholesale lenders, which a mortgage broker reaches, write standalone lines in first or second lien position, with parameters set by program rather than by branch.

Lendmire is a mortgage broker, not a lender. It works with a network of wholesale HELOC lenders and matches a borrower’s property, credit profile, and leverage need to the program that fits. Its HELOC placements are limited to 16 full-service states, which is narrower than its DSCR investor footprint of 41 markets, including Washington, D.C. The right lender for you depends on property type, occupancy, credit, how much you need, and what the purchase lender will accept. No single name answers that for everyone.

How the Money Moves, Step by Step

The sequence matters more than the product. Done in the wrong order, a borrower can end up with an open line and a purchase loan that won’t accept it.

1. Choose the property that secures the line. It is your primary residence, a second home, or a rental you already own. The line is secured by that property, not by the one you’re buying.

2. Ask the purchase lender first. Confirm whether documented borrowed funds are accepted, and whether there is a cap on the borrowed share. Across the wholesale network, DSCR purchase programs split three ways: some accept documented borrowed funds, some cap the borrowed share, and some want part of the down payment unborrowed.

3. Close the line and draw before the purchase. At least 75% of the line is drawn at closing on the wholesale programs described below, so the money is usually in your account before you make an offer.

4. Keep the paper trail. Save the line agreement, the draw statement, and the bank deposit record. A lender who finds an undisclosed loan during review puts the file at risk.

5. Separate three pots of money. The down payment, closing costs, and reserves are different buckets. Borrowed funds commonly serve the first two but are excluded from the third.

6. Underwrite the new property on its own terms. The purchase loan reads the new home’s numbers, and the line’s payment sits on top as a real obligation.

This order is the reason a wholesale broker is useful here. The borrowed-funds question has to be answered before any line is opened, because a line cannot be unwound for free.

How Underwriting Treats the Line

Two underwriters look at two different files, and they ask different questions.

The line itself is underwritten on a debt-to-income basis. Debt-to-income (DTI) is capped at 50% at most. For credit profiles from 600 to 679 the cap is 45%, and any ratio above 45% requires a 680 minimum score. The qualifying payment is the interest-only payment calculated on the maximum draw, not on what you actually pull. A borrower who plans to draw only part of a large line is still measured against the whole thing.

Credit is read from a single-bureau score model keyed to the primary wage earner. The report can be no more than 90 days old at closing, and rescores are not permitted. Lines at or below $500,000 ordinarily run an automated valuation instead of a traditional appraisal, though a higher CLTV may call for a secondary valuation. A full appraisal is required on every line above $500,000, and any borrower may request one.

The purchase loan is a separate analysis. When the new home is a rental financed with a DSCR loan, the file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The ratio compares the new property’s rent against that property’s own principal, interest, taxes, insurance, and any HOA dues. Across Lendmire’s wholesale network, DSCR purchases most often land at 75%-80% LTV (20%-25% down), and select programs reach 85% LTV with roughly a 700-plus score. A coverage of 1.00 is where many select programs start, while a separate select-lender path goes below 1.00 with leverage and terms adjusted. Stronger coverage opens better pricing and leverage. The complete DSCR loans guide covers the full structure.

One distinction trips people up. Clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation, and so does the payment on the HELOC you used for the down payment.

Federal consumer guidance is clear about the line itself. The CFPB’s HELOC overview describes it as an open-end line you can draw on repeatedly, with a draw period (the example it gives is 10 years) and minimum payments that depend on the balance. It also warns that a lender may stop further draws if the home’s value falls significantly. An approved but undrawn line is therefore not guaranteed cash.

Ceilings Depend on Occupancy

A common mistake is quoting one CLTV ceiling for every property. On Lendmire’s wholesale network the ceiling depends on how the securing property is used, and the highest tier is narrow.

Several details sit inside that table. On a primary residence, 90% CLTV applies only to lines up to $500,000, and at 720 or better. A 700 profile reaches 85% on lines up to $500,000. Credit tiers step down from there: 640 reaches 80%, 620 reaches 70% on lines up to $400,000, and 600 reaches 60% on lines up to $400,000.

Only a primary residence can carry the larger lines, which cap at 75% CLTV and require a full appraisal. An investment-property line never exceeds 70% CLTV or $500,000.

These are program guidelines, not promises, and each file is reviewed individually.

Broader market surveys and consumer guidance describe other limits. The CFPB’s HELOC booklet illustrates a credit limit built from a percentage of the home’s value (75 percent in its example), less the mortgage still owed. That is a market-wide illustration, not a network rule. The network figures above are the ones that apply here.

Structures and Variations

Lendmire places lines with two wholesale programs. A higher-leverage program caps combined exposure at $2,000,000 across up to three lines. A longer-runway program caps combined exposure at $750,000. Where they differ, each figure applies only within its own program’s terms, and no single line can exceed $750,000 whichever program writes it.

Both write a standalone line in first or second lien position, so you can add the line to a home that already has a mortgage. On primary residences and second homes there are two draw structures: a 3-year interest-only draw with a 17-year fully amortizing repayment, and a 5-year interest-only draw with a 25-year repayment. Investment lines run the 5-year draw and 25-year repayment structure only. Line sizes run from $25,000 to $750,000. Pricing floats through both the draw and repayment periods and never converts to fixed, so the payment can change.

A line on a home that already has a mortgage is a second mortgage, paid in addition to the first, and lines like this usually carry adjustable pricing.

For the down payment itself, a line is one of several tools:

On a standard rental cash-out refinance, Lendmire’s network tops out around 75% LTV. A short-term-rental cash-out is lower, at 70%. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

Where the General Rule Breaks

The general rule is that a line on one property can fund the down payment on another. These cases bend it.

A fully borrowed down payment. This is the largest unknown. Some DSCR purchase programs accept it with documentation, and others want part of the down payment unborrowed. A plan can fail on that rule alone, which is why the purchase lender gets asked first.

LLC title. An LLC cannot hold title to the property securing the line. Fee simple or leasehold must be held by the individual borrower or an inter vivos revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts are all excluded. A rental already deeded to an LLC needs a vesting change, or a DSCR cash-out refinance is the better tool.

Ineligible property types. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agriculturally zoned properties are not eligible to secure a line. On the DSCR purchase side, manufactured homes (single- and double-wide), log homes, and barndominiums are not offered. Single-family, 2-4 unit, PUD, townhome, and condominium properties, including non-warrantable condos, are eligible. A property listed for sale, or listed within the past 60 days, is ineligible in several states.

Exposure limits. A borrower is limited to three lines, and anyone owning more than 15 financed properties is not eligible. That rarely affects a first-time investor, but it bites portfolio owners who stack lines.

A shrinking line. Lenders can reduce or freeze lines, and draws can also be stopped if the home’s value falls significantly. The home is collateral, so missed payments put it at risk.

Reserves. Reserves vary by lender, leverage, loan size, and transaction type. They commonly run around 6 months of PITIA on the DSCR purchase, with conservative rate-and-term files at modest leverage under $1,500,000 sometimes seeing them waived, and larger loans stepping up to about 9 months. Because borrowed funds are commonly excluded from reserves, the cash cushion often has to be unborrowed.

What the Decision Looks Like in Practice

The key point is that a HELOC moves the source of the down payment. It does not remove it. If the line covers the whole down payment, total borrowing across both properties approaches the full purchase price, and you carry two payments out of one rent check.

Consider a modeled scenario. An investor with strong credit and a primary residence carrying a first mortgage buys a rental on a DSCR purchase at 75% LTV, which means 25% down. The rental’s rent covers its own payment at about 1.25x, a comfortable reading for the DSCR loan. If the investor draws a line on the primary home to fund the whole 25% down, the line’s payment competes for the same rent. The DSCR loan doesn’t count it, but the investor’s real cash position does. Blend the two obligations and the picture can slide toward 1.00x, or below it, depending on vacancy and repairs. This is an illustration, not market data. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

Different profiles land differently:

• An investor with a primary-home line and savings. Mixing the two usually reads cleanest, because part of the down payment is unborrowed and the reserve cushion stays intact.
• An investor whose only equity sits in an LLC-held rental. The line may not be an option at all, since the LLC cannot hold title. A DSCR cash-out refinance can be the better route.
• An investor whose rental coverage is already thin. Borrowing the down payment tightens a file that has little room, and a lower-leverage purchase may be the stronger structure.

For the DSCR purchase side of this decision, Lendmire’s piece Banks That Offer a DSCR HELOC for a Down Payment on a Rental Property goes deeper.

If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Reach the team at 828-256-2183. The brokerage arranges financing through select lenders, so every figure remains subject to lender guidelines and full file review, and nothing here is a commitment to lend.

Key Terms Defined

CLTV (combined loan-to-value): The total of all loans secured by a property, divided by its value.

DTI (debt-to-income): Your monthly debt payments divided by your monthly income.

Source of funds: The documented origin of the cash used for a down payment, such as savings, a gift, or a borrowed line.

Draw period: The stretch of time when you can pull money from a line before repayment begins.

DSCR (debt service coverage ratio): A rental property’s monthly rent divided by its monthly principal, interest, taxes, insurance, and any HOA dues.

About Lendmire

As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and real estate investors in its 16 full-service states open home equity lines of credit arranged through wholesale lenders. Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB’s HELOC overview

2. CFPB – What You Should Know About HELOCs

3. White Coat Investor – HELOC on investment property