Banks That Offer a HELOC to Buy a New Home

The Quick Read: A home equity line can fund the down payment or cash portion of a new home purchase, but whether it works depends on the occupancy of the home securing the line, your credit profile, how much equity is left after the first mortgage, and whether the new-home lender will count the line’s payment against you. Lendmire is a mortgage broker, so it matches your file to a wholesale program instead of pointing you to one bank.

• On an investment property, the network’s lines top out at 70% combined loan-to-value (CLTV), with a 700 minimum credit score.
• On a primary residence or second home, the ceiling reaches 90% CLTV, but only at a 720-or-better credit profile, and the 90% tier applies to lines up to $500,000. Lower credit tiers carry lower ceilings, and a primary-residence line above $500,000 caps at 75% CLTV.
• At least 75% of the line is drawn at closing, so plan for most of the money to be borrowed up front rather than held back in reserve. Later draws after closing are possible on the longer-runway program, with a $1,000 minimum in most states.
• LLCs and corporations cannot hold title on these lines, which is the sharpest difference from a DSCR loan.

Which Banks Offer This? (Why There Is No Single List)

No single list of banks can be called honest, because the answer changes by lender, by property, and by borrower. Big banks, credit unions, and online lenders all write home equity lines. Each sets its own rules on what the money can be used for, what kind of property can secure the line, and how much equity must stay untouched.

Many lenders allow the funds for a down payment. Yahoo Finance notes that homeowners can use equity in a primary residence toward a down payment on a vacation home or investment property, covering down payment and closing costs up to the approved limit. Others restrict the use of funds or refuse to lend against a rental at all.

That is where a broker earns its place. Lendmire works with a multi-state network of wholesale HELOC lenders. It looks at the property, the equity, the credit profile, and the goal. Then it matches the file to the program whose guidelines fit. The right program for your situation depends on occupancy, credit, leverage, and how much of the line you need on day one.

One availability point matters before anything else. Lendmire’s HELOC placements run through its 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 brokerage’s DSCR investor footprint of 41 markets, including Washington, D.C.

What the Network’s Lines Look Like

The ceiling depends on the occupancy of the home that secures the line, not the home you are buying. The network’s own limits are tiered by occupancy and credit, as shown below, and every figure is subject to lender guidelines and full file review.

Lower credit tiers step the ceiling down. A primary residence at 660 to 700 typically tops out near 85% CLTV on lines up to $500,000. At 640 it is typically 80%. At 620 it is 70% on lines up to $400,000. The program floor is 600. A second home needs at least 640, and an investment property needs at least 700.

A line above $500,000 is for primary residences only. The credit requirement is 700 or better (720 on the longer-runway program), the cap is 75% CLTV, and a full appraisal is required. The longer-runway program is one of the two wholesale programs behind these lines, and it uses a 5-year draw with a 25-year repayment. The other is the higher-leverage program, which is where the 90% tier lives. Details differ between the two, so each figure applies only within its own program’s terms.

Here is how the lines are built:

• Position. The line is a standalone first or second lien.
• Draw structure. On primary residences and second homes, one structure draws interest-only for 3 years and then amortizes over 17. The other draws for 5 years and then amortizes over 25. Investment lines use the 5-year draw and 25-year repayment only.
• Size. Lines run from $25,000 to $750,000.
• Pricing. On both programs, pricing floats through both the draw and repayment periods and does not convert to fixed.
• Qualifying ratio. Debt-to-income (DTI) is capped at 50%, or 45% for credit profiles from 600 to 679. The payment is calculated as interest-only on the maximum draw.
• Valuation. Lines at or below $500,000 ordinarily use an automated valuation instead of a traditional appraisal. A higher CLTV may require a secondary valuation, and you can request a full appraisal in any case.

How a HELOC-Funded Purchase Works, Step by Step

A HELOC is an open-end line of credit. The CFPB describes a borrowing window called the draw period, followed by a repayment period that is often set up over 10 or 20 years. Falling behind can cost you the home that secures the line. Here is how the pieces fit together for a purchase.

1. Measure usable equity. Take the home’s value, apply the CLTV ceiling that fits your credit and occupancy, and subtract the existing mortgage.

2. Open the line before you make offers. The money needs to be in hand and documented before the purchase contract is under pressure.

3. Draw at closing. At least 75% of the network’s lines is drawn at closing.

4. Move the funds into a verified account. The new-home lender will want to see where the down payment came from.

5. Let the new lender count the payment. The line’s payment and the existing mortgage normally land in your personal DTI.

6. Close on the new home. The line stays secured by the home you borrowed against, whether that is a primary residence, second home, or investment property, not the home you are buying.

A quick percentage example shows the math. Say your first mortgage is 55% of the home’s value, and you are a 720-plus borrower on a primary residence. At the 90% CLTV ceiling, the line can reach up to 35% of the home’s value, subject to the $500,000 line cap. Now put an investment property at the same 55% first mortgage. At the 70% ceiling, the line can reach only 15% of value. Same equity, very different usable cash.

Benzinga points out that you must show you can carry three obligations at once: the existing mortgage, the line’s interest, and the new home’s mortgage. That is the real test. Equity gets you the line, and income and credit decide whether the new lender will let you stack it.

Key Terms Defined

CLTV (combined loan-to-value): Your first mortgage plus the new line, divided by the home’s value.

Draw period: The stretch when you can borrow from the line, usually paying interest only.

Repayment period: The stretch after the draw period when you pay principal and interest until the balance reaches zero.

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

Lien position: Whether the lender sits first or second in line to be repaid if the property is sold or foreclosed.

DSCR (debt service coverage ratio): Monthly rent divided by the monthly principal, interest, taxes, insurance, and any HOA dues on the property.

Where the General Rule Breaks

The basic rule says equity in one home can fund the next. These edge cases bend it.

The securing property is a rental. The ceiling drops to 70% CLTV, the credit minimum rises to 700, and the line caps at $500,000. Some lenders in the wider market will not write a line against a rental at all.

The property sits in an LLC. These lines require title held by the individual borrower or a revocable living trust. LLCs, corporations, partnerships, and irrevocable, blind, or land trusts cannot hold title. If your rental is already deeded to an LLC, you either change the vesting or use a DSCR cash-out refinance instead, subject to lender program eligibility.

You plan to rent out the old home. Line terms can restrict renting the property. Read them before you move out and convert the home to a rental.

You plan to sell the old home. A sale generally requires paying off the line in full, according to the CFPB’s HELOC booklet. Plans that depend on that sale carry timing risk. The same booklet notes that a lender can reduce your credit line if the home’s value falls, which could happen mid-strategy.

The property type is off the list. Eligible collateral includes single-family homes, 2-4 units, PUDs, townhomes, and condominiums, including non-warrantable condos. Manufactured homes, co-ops, condotels, log homes, and commercial, mixed-use, or agricultural-zoned property are not eligible.

Your history has a mark on it. A bankruptcy needs 4 years of seasoning from discharge or dismissal. A foreclosure-family event is handled differently by the two wholesale programs. One program seasons a foreclosure at 7 years and a deed-in-lieu, pre-foreclosure, or short sale at 4. The other declines the history regardless of age.

You own many properties. A borrower is limited to three lines. Combined exposure caps at $2,000,000 on the higher-leverage program and $750,000 on the longer-runway program. A borrower with more than 15 financed properties is not eligible.

Tax treatment can depend on how the funds are used and how the property is held. Keep clear records and speak with a qualified tax professional before relying on any deduction.

HELOC, Home Equity Loan, or Cash-Out Refinance?

Both a HELOC and a home equity loan are second mortgages when a first mortgage exists, and HELOCs usually carry adjustable pricing. The network’s lines are floating throughout, so a stress test is wise. Ask what happens to your plan if the payment on the line rises meaningfully.

When the Next Purchase Is a Rental

If the new property is an investment property, the HELOC is often just the down payment. The purchase loan itself is a different question. The DSCR approach qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, instead of on your personal DTI. Lendmire’s complete DSCR loans guide walks through the full structure.

Here are the ranges across the wholesale network:

• Leverage. Most purchase files land at 75% to 80% LTV, meaning 20% to 25% down. Select programs reach 85% LTV with roughly a 700-plus score.
• Coverage. A 1.00 ratio is where many select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
• Credit. A 620 floor exists in parts of the network, most programs want around 660, and 700-plus unlocks the strongest tiers.
• Reserves. They vary by lender, leverage, and loan size. About 6 months of PITIA (principal, interest, taxes, insurance, and association dues) is common. Conservative files at modest leverage under $1,500,000 can see reserves waived, and larger loans typically step up to about 9 months.

Two cautions apply. First, a DSCR above 1.00 is not positive cash flow. The ratio compares rent to PITIA only, so repairs, vacancy, management, utilities, and capex sit outside it. Second, the HELOC draw can still appear as a personal liability to lenders. Whether cleared HELOC funds count toward reserves is a program-specific question, so ask before you rely on them.

A bigger down payment lowers the monthly payment and can lift the coverage ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage. DSCR programs are also not offered on manufactured homes, log homes, or barndominiums.

Questions to Ask Before You Apply

• Do you allow the proceeds toward a purchase or down payment on another property?
• Do you allow the line on a rental, or only on a primary home or second home?
• What percentage of the line must be drawn at closing?
• Does the pricing ever convert to fixed?
• Does the new-home lender count the line’s payment, and on what basis?
• What happens to the line if I sell or rent the securing property?

Who Should Skip This

Skip the HELOC route if your DTI is already stretched, if you cannot carry three payments for a stretch, or if your equity is thin after the first mortgage. Skip it, too, if the securing home sits in an LLC you are unwilling to retitle. In those cases a DSCR cash-out refinance on the rental itself, or a smaller down payment, may fit better.

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. The illustrative calculator on this page gives a rough sense of the leverage math.

About Lendmire

Lendmire is a mortgage brokerage (NMLS# 2371349) arranging home equity lines of credit — primary-residence, second-home and investment-property lines — through a wholesale lending network in its 16 full-service states. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Yahoo Finance: Using a HELOC for a down payment

2. The CFPB

3. Benzinga: HELOC for down payment

4. CFPB: HELOC consumer booklet