Banks That Offer a HELOC to Fund a Down Payment on a New Home

The Quick Read: A home equity line of credit (HELOC), a revolving credit line secured by your home’s equity, is widely available on the home you live in. The cash can fund a down payment on another property. Which bank fits depends on the collateral, your credit, and the combined leverage you want. Lendmire is a mortgage broker, not a lender, so it matches your file to a wholesale lender whose line fits.

• On an investment property, the network ceiling is 70% combined loan-to-value (CLTV, meaning all loans against the property divided by its value). That comes with a 700 minimum credit score and a $500,000 maximum line.
• Primary-residence and second-home lines reach 90% CLTV only with a 720 or better credit profile, and only up to $500,000.
• At least 75% of the line is drawn at closing, so interest starts on most of the money right away.
• Your purchase lender decides separately whether borrowed funds count toward the down payment.
• The rental-coverage test on the new loan ignores the HELOC payment, but your monthly budget does not.

Which Banks Will Write the Line? Start With the Collateral

Lendmire does not rank or recommend individual banks. Big banks, regional banks, credit unions, and online lenders each write different slices of this product, and their appetite changes. Lendmire works with a network of wholesale HELOC lenders. A broker can shop those lenders and match your property, equity, and credit to a program that fits. The best program for your situation depends on the collateral, your score, how much you need, and how the file is documented.

NerdWallet reports that not every lender offers a HELOC on an investment property, that qualification is strict, and that some lenders restrict by location or year-round rental use.

Here is how the network’s equity-line limits break out by collateral. Every figure is subject to lender guidelines and full file review, and none is a commitment to lend.

Lower credit tiers sit well below those ceilings. On a primary residence, a 660 score tops out at 85% CLTV, and a 620 score tops out at 70%. A line above $500,000 is available on primary residences only. It requires a score of 700 or better (720 on the longer-runway program, the one with the 5-year interest-only draw and 25-year repayment), caps at 75% CLTV, and needs a full appraisal.

One availability note matters here. Lendmire’s equity-line placements run through 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 its DSCR footprint of 41 markets, including Washington, D.C.

Key Terms Defined

Equity is your home’s value minus what you owe on it. It is the pool a lender lets you borrow from.

Draw period is the stretch when you can pull money from the line, usually paying interest only on what you have drawn.

Repayment period is the stretch after the draw ends, when the balance amortizes. Amortizing means each payment covers interest plus principal.

DSCR (debt service coverage ratio) is the monthly rent divided by the property’s monthly payment. It is the main test on a DSCR loan, a loan that qualifies primarily on property-level rental income covering the payment, subject to lender guidelines.

PITIA is principal, interest, taxes, insurance, and any association dues. It is the full monthly obligation of the property.

Borrowed funds are down payment money that came from a loan rather than your savings. Purchase lenders treat them differently from cash you already held.

How the Process Runs, Step by Step

You open and draw the line first, then you apply for the purchase loan. The two loans have separate lenders, separate underwriting, and separate rules.

1. Pick the collateral. This is usually your primary residence. A rental can work, but lines on rentals are scarcer.

2. Measure usable equity. The Consumer Financial Protection Bureau defines a HELOC as an open-end line you can draw on repeatedly, with equity equal to value minus the mortgage balance. The lender then lends only up to its own CLTV cap. Say your first mortgage equals 50% of the home’s value and the cap is 75% CLTV. The line can be at most 25% of the home’s value.

3. Underwrite the line. The bank reviews you, not the new property. SmartAsset notes that lenders check income and existing debts before approving a line. On the network’s programs, the debt-to-income ratio (DTI, your monthly debts divided by your monthly income) tops out at 50%. It tops out at 45% for scores from 600 to 679. A ratio above 45% requires a 680 minimum. The test uses the interest-only payment calculated on the maximum draw, not just the amount you plan to use.

4. Value the home. Lines at or below $500,000 ordinarily run an automated valuation with no traditional appraisal. A higher CLTV may require a second valuation. Every line above $500,000 requires a full appraisal, and you can request one in any case.

5. Close, draw, and keep the paper trail. Open the line and draw before the purchase loan goes into underwriting. Keep the line agreement, the draw confirmation, and the transfer into the purchase.

6. Underwrite the purchase separately. The new lender decides whether borrowed funds are an acceptable source, and for which bucket: down payment, closing costs, or reserves.

Ask the purchase lender about borrowed funds before you open or draw anything. Acceptance varies by lender and by program, and a drawn line cannot be undrawn.

Two Draw Structures, and What They Mean for a Down Payment

Wholesale equity lines come in two program structures. The shorter-draw program offers a 3-year interest-only draw followed by a 17-year amortizing repayment. The longer-runway program offers a 5-year interest-only draw followed by a 25-year amortizing repayment. Investment-property lines run the 5-year draw and 25-year repayment structure only.

Both programs share traits that matter when the line funds a purchase:

• Pricing floats through both the draw and the repayment period. It never converts to a fixed structure, so the payment moves with the market.
• Borrowers can add draws after closing, with a $1,000 minimum on the longer-runway program.
• Each figure applies only within its own program, so any quote should come with that program’s draw and repayment structure attached.

Size the line around your actual down payment need, since most of it is drawn at closing. The interest-only draw helps your early cash flow, a point SmartAsset also raises. The catch is the payment step-up when repayment begins, so a short hold with a planned refinance fits better than a long hold on the same line.

Where the General Rule Breaks

The rule says you can borrow against equity and use the cash for a down payment. These edge cases are where files get stuck.

Your rental sits in an LLC. Equity lines vest in an individual borrower or a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. This is the sharpest structural difference from a DSCR loan, which can close in an entity name, subject to program terms. A rental already deeded to an LLC needs a vesting change or a DSCR cash-out refinance instead.

The collateral is a rental. The network’s investment-property line caps at 70% CLTV, needs a 700 score, and stops at $500,000. If your rental needs more, a DSCR cash-out refinance is the other route. Most programs top out around 75% LTV on that structure and expect roughly 6 months of seasoning.

You are collecting lines. A borrower is limited to three lines. Combined exposure caps at $2,000,000 on the shorter-draw program and $750,000 on the longer-runway program. A borrower owning more than 15 financed properties is not eligible.

Your home has a property-type problem. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use, and agriculturally zoned properties are not eligible. Single-family, 2-4 units, townhomes, PUDs, and condominiums (including non-warrantable ones) are eligible.

Your credit history has marks. A bankruptcy needs 4 years of seasoning from discharge or dismissal. On primary residences and second homes, one program seasons a foreclosure at 7 years and a deed-in-lieu, pre-foreclosure, or short sale at 4. The other declines that history regardless of age.

The line shrinks or comes due. The CFPB’s HELOC brochure says that if you sell the home, you generally must pay the line off in full. It also says lenders may reduce the line if the home’s value falls. A line you counted on for the next deal can shrink at the wrong moment.

You borrow the whole down payment. A line that funds the entire 20%-25% down payment on a purchase financed at 75%-80% LTV leaves you financed near 100% of the price. That is allowed on paper, but it leaves no cushion if rents soften or values dip. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

You try unsecured shortcuts. A personal loan or a credit card advance is not a HELOC. Purchase lenders commonly treat unsecured borrowing differently, so ask before you rely on it. Gift funds are also underwritten under different rules than line proceeds.

What the DSCR Purchase Side Looks Like

Once the cash is documented, the new loan stands on its own merits. Across the wholesale network, most DSCR purchase files land at 75%-80% LTV, which means 20%-25% down. Select programs reach 85% LTV, or 15% down, with roughly a 700+ score. For a fuller walkthrough, see Lendmire’s complete DSCR loans guide. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

Coverage is where select programs set their floor. A 1.00 ratio is where many select programs start, and a stronger ratio opens better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Credit works the same way. A 620 floor exists in parts of the network, most programs want around 660, and 700+ unlocks the strongest leverage tiers. Loan sizes run up to $3,000,000 on standard programs (smaller balances available through select lenders), and reserves commonly sit around 6 months of PITIA. They vary by lender, leverage, and loan size.

Run the numbers on a duplex bought at 75% LTV where rent covers the full PITIA at roughly 1.2x. The DSCR test sees a healthy property. It does not see your HELOC payment, and it does not see repairs, vacancy, management, utilities, or capital spending. Benzinga makes the same point from the borrower’s side: you must be able to carry the primary mortgage, the HELOC, and the new mortgage together. Clearing 1.00 does not mean positive cash flow, and a deal can pass the coverage test while the investor’s account bleeds. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.

Borrowed down payment funds are commonly excluded from reserves, though that varies by lender. If so, you need separate unborrowed cash for the reserve requirement. The strongest files clear both tests, with enough equity behind the line and enough rental coverage on the new property. Lendmire’s piece Banks That Offer a Bank Statement HELOC to Cover the Down Payment on Your Next Home covers the alternative-documentation version of this same decision.

HELOC, Cash-Out, or Something Else?

This is a genuine toss-up for many investors, and it comes down to which property you are willing to put at risk. A HELOC on your home protects your rentals but puts your residence behind a floating-price loan. A DSCR cash-out on an existing rental keeps your home clear but changes the rental’s loan.

A HELOC and a DSCR purchase loan are not rivals. One supplies the cash and the other finances the property. The decision is whether the line’s floating payment fits alongside the new property’s mortgage, and whether your residence is the right thing to pledge.

Your Next Step

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 to talk through your file. Every program is subject to lender guidelines and full file review, and nothing here is a commitment to lend.

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. NerdWallet

2. CFPB: What Is a Home Equity Line of Credit HELOC

3. SmartAsset – HELOC for a down payment

4. CFPB – What you should know about home equity lines of credit

5. Benzinga