Banks That Offer a HELOC for a Down Payment on a Home Purchase

The Quick Read: Whether a bank will take HELOC cash as a down payment depends on the lender financing the purchase, not on the bank that opened the line, so the useful question is which programs fit your equity, credit, and property rather than which bank name to call.

• The purchase lender decides if borrowed funds count, and policies differ by lender.
• On a primary residence or second home, the network’s equity lines reach 90% CLTV only at a 720-or-better credit profile.
• On an investment property, the equity line tops out at 70% CLTV, with a 700 credit minimum.
• On a DSCR loan, a HELOC payment sits outside the ratio, but your cash flow still has to carry it.
• Lendmire is a mortgage broker, so it shops several wholesale lenders instead of pitching one bank.

Who Decides Whether a HELOC Counts as a Down Payment?

The purchase lender decides. A HELOC is a general-purpose line, so the bank that opens it does not restrict how you spend the cash. The lender financing your new property sets the rule on borrowed funds.

That is why a list of banks is the wrong tool. Some lenders accept documented borrowed funds. Others cap the borrowed share or want part of the down payment to be unborrowed. Some want the cash seasoned in your account first. An investor-education thread on BiggerPockets shows one lender calling the strategy viable but wanting the money to sit in the bank first. Another thread on BiggerPockets shows a bank refusing it outright. Both are single experiences, not rules.

Lendmire is a mortgage broker. It does not lend, and it does not rank banks. It works with a network of wholesale HELOC lenders and matches the scenario to a program. The best program for your situation depends on occupancy, credit profile, how much leverage you need, and your documentation.

How Underwriting Treats Borrowed Down Payment Funds, Step by Step

Underwriting a borrowed down payment is a sequence of separate tests. Each loan is reviewed on its own terms.

1. Pick the collateral. This is usually your primary home, a second home, or an existing rental with equity. Equity is the property’s value minus what you owe on it.

2. Qualify for the line. The HELOC lender reviews equity, credit, and debt-to-income. Equity-line lenders size the line off combined loan-to-value, which counts the first mortgage plus the new line.

3. Ask the purchase lender first. Before you draw, ask whether borrowed funds count, whether there is a cap on the borrowed share, and what documents they want.

4. Draw and park the cash. Move the money into your own account. Keep the line agreement, the draw statement, and the deposit record. Underwriters want a trail that is easy to follow.

5. Close the purchase loan. For a rental, that is typically a DSCR loan. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.

6. Carry both obligations. The HELOC payment is a separate debt. On loans that use debt-to-income, it counts as a debt. On a DSCR loan, it sits outside the ratio, but it still leaves your account every month.

Down payment and reserves are also separate buckets. Borrowed funds may count toward one and not the other. Confirm each with the lender before you draw.

What the Equity-Line Programs Allow

The network’s equity lines are standalone lines in first or second lien position, and the limits depend on how the collateral is occupied. Any one ceiling quoted without its occupancy is misleading. Figures below are typical program guidance, subject to lender guidelines and full file review.

Lower credit tiers step the ceiling down. On a primary residence, a 700 profile reaches 85% CLTV up to $500,000, and a 640 profile reaches 80%. On a second home, a 660 profile reaches 80%. An investment line is 70% CLTV at both 700 and 720.

Lines run from $25,000 to $750,000. A line above $500,000 is primary-residence only, caps at 75% CLTV, and needs a full appraisal. Lines at or below $500,000 ordinarily use automated valuation instead of a traditional appraisal.

The 600 credit floor applies to primary residences only, since second homes start at 640 and investment lines at 700. Debt-to-income tops out at 50% across the programs, and it is 45% for credit profiles from 600 to 679. The test uses the interest-only payment on the maximum draw.

Two draw structures exist on primary residences and second homes. One has a 3-year interest-only draw and a 17-year repayment. The other has a 5-year draw and a 25-year repayment. Investment lines use the 5-year draw and 25-year repayment only. Pricing floats during both the draw and the repayment period and never converts to fixed.

At least 75% of the line is drawn at closing. That fits a down payment, but it makes the line a lump sum, not a standby reserve.

Availability is limited to Lendmire’s 16 full-service states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA, and WA. That is narrower than the DSCR footprint of 41 markets, including Washington, D.C.

Where the General Rule Breaks

LLC title. The equity lines require title held by an individual or a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. A property already deeded to an LLC needs a vesting change, or a DSCR cash-out refinance instead. DSCR loans can be made to LLCs, subject to lender program eligibility.

Investment collateral is the tightest tier. The 70% ceiling and 700 floor mean a rental produces less spendable equity than a primary home with the same value and balance.

Property type. Single-family, 2-4 units, PUD, townhome, and condominium, including non-warrantable condos, are eligible. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agricultural zoning are not.

Listed properties. A property listed for sale, or listed within the past 60 days, is ineligible in NC, PA, TN, TX, and WA. Some states also layer extra caps on primary residences.

Derogatory history. A bankruptcy needs 4 years of seasoning from discharge or dismissal. Foreclosure-family history splits by program on primary residences and second homes. One program seasons a foreclosure in 7 years and a deed-in-lieu, pre-foreclosure, or short sale in 4. The other declines the history regardless of age.

Exposure limits. A borrower is limited to three lines. Combined exposure caps at $2,000,000 on one program and $750,000 on the other. An owner of more than 15 financed properties is not eligible.

Collateral risk. The CFPB notes that a HELOC is secured by your home and that falling behind could cost you the home. It also describes the draw period followed by a repayment period. The CFPB’s comparison page adds that a HELOC on a home with a mortgage is a second payment on top of the first. A HELOC against your own home to buy a rental puts your residence behind the rental’s risk.

The Investor Decision: Equity and Coverage Are Two Tests

A larger down payment lowers the new loan’s payment and can lift the DSCR. It does not erase leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.

On the purchase side, most DSCR files land at 75% to 80% LTV on a purchase, meaning 20% to 25% down. Select programs reach 85% LTV with a score of roughly 700 or better. Credit floors vary: 620 exists in parts of the network, most programs want around 660, and 700 or better unlocks the strongest leverage tiers. Reserves commonly run around six months of PITIA, though they vary by lender, leverage, loan size, and transaction type.

The ratio compares rent to PITIA only. Coverage of 1.00 is where select programs start, not a standard, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Clearing 1.00 does not mean positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the calculation, and so does your HELOC payment.

Run both numbers before you draw. If the rent barely covers the new loan, a second payment from the line comes out of your pocket. Stacking a fully borrowed down payment on top of a purchase loan also means borrowing close to the whole value of the property, which is why some lenders resist it. Another piece covers banks that offer a DSCR HELOC for a down payment on a rental property.

The complete DSCR loans guide covers how the purchase loan itself is reviewed.

Key Terms Defined

CLTV is combined loan-to-value, which adds the first mortgage and the new line, then divides by the property’s value.

Draw period is the stretch when you can borrow from the line, often with interest-only payments.

Repayment period is the stretch after the draw, when you pay down principal and interest.

Seasoning is how long funds have sat in your account before a lender treats them as yours.

DSCR is the debt service coverage ratio: monthly rent divided by the full monthly obligation of principal, interest, taxes, insurance, and any HOA dues.

Non-warrantable condo is a condominium that does not meet standard project rules, which the equity-line programs still allow.

How to Find the Right Fit Before You Apply

Lender policies are not published in one place, and application fees are not worth spending on a bank that rejects borrowed funds. Settle these points in order.

A broker shops several wholesale lenders at once. It matches property type, credit profile, and leverage need to the program that fits, instead of testing banks one at a time. Sequence matters. Confirm the purchase lender’s position first, get the line approved second, draw third, and avoid opening new credit before closing.

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. Call 828-256-2183 or request a quote.

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage that arranges home equity lines of credit through wholesale lending partners in its 16 full-service states. Lines on primary residences, second homes and investment properties are each reviewed individually by the lender under the program’s occupancy, credit and combined-loan-to-value guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. BiggerPockets – Using a HELOC to buy an investment property

2. BiggerPockets – Bank stated that HELOC cannot be used as down payment

3. CFPB

4. CFPB’s comparison page