How Long After You Purchase A Home Can You Get A HELOC?

how long to wait for heloc

So you have done your research and found out the shocking truth that using a home equity line of credit (heloc) will allow you to pay off your home faster. Good for you. The problem is you just purchased a home so how long do you have to wait before you can get into a HELO? The answer really might surprise you.

Transcript

Hey, gang. Michael Lush. We got a question of … What was the question again?

Recently, got a question is how long does one have to wait in order to refinance into a home equity line of credit? There’s actually 3 parts to that answer, or actually 3 answers. One is you can actually buy a home using a home equity line of credit, so you don’t have to wait.

Quite frankly, on a traditional mortgage, I don’t know if you realized this, but they have what’s called a truth in lending disclosure that basically tells you that you’re buying your house at the end of 30 years, but, by the way, we’re going to buy the bank one as well. Thank you very much. Instead of using a traditional mortgage, you can actually purchase a home using a home equity line of credit.

A home equity line of credit is a bank product, it’s not a government loan. Each bank and credit union has their own policies and terms and appetite for risk. Although some may allow you to purchase using a home equity line of credit, others may force you to wait 6 months to be in the home, and owner of record for 6 months before you actually refinance into a home equity line of credit. That’s typically the worst case scenario.

Actually, I’ve talked to a couple of banks that don’t have any seizing requirement, but they don’t allow purchase. Now, what this means is you don’t have to be owner of record on your home for any period of time in order to qualify for a home equity line of credit. One would think, “Okay. Well. That’s great. Now, I can purchase a home using a home equity line of credit since the bank doesn’t have any seizing requirements.” Some banks actually have a policy that don’t allow you to buy a home using a home equity line of credit.

I’ve asked this question to numerous bankers and underwriters, “What you’re telling me is that I could buy a home using a traditional mortgage on Friday, and then turn around on Monday, refinance to a home equity line of credit?” The answer is yes, unfortunately.

Again, this philosophy and strategy that we teach just hasn’t caught up to underwriters and bankers. We can still use it, but it just means you can’t buy a home with their policy, but you can refinance it the next day. Doesn’t make any sense, I know.

About The Author

Michael Lush

Michael Lush is a mortgage industry expert, having spent fourteen years as a mortgage banker helping thousands of families with their mortgage needs. He is also a father and husband. Michael is co-author of the book Replace Your Mortgage: How To Pay Off Your Home In 5-7 Years On Just Your Current Income. Besides this blog, you can find him on Youtube where he shares more information about HELOC's.