Heloc situation to get short sale property

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lovingit

Member
Hello,

We are in a bind.  We need to sell our house to make an offer on an approved short sale.  We don't have the ability to borrow the down payment, since the $ is tied up in equity.  We are working with the listing agent of the short sale home who says the bank does not want a contingent sale.  The agent asked if we can take out a HELOC to show that we have a down payment to the bank as serious buyers.

I don't completely understand how we can take out a HELOC, because then we would not be approved to take out a loan for the short sale home.  Has anyone done this before?  I imagine something like taking out the HELOC, making an offer with bank on short sale home with this liquid HELOC, sell our home, pay back the HELOC.  But how would we get approved with a loan if we do the HELOC?  We don't want to be in a situation where we sell our home and don't get the short sale.  Can this be done? 
 
Welcome to TI.

I would pass on this. So you sell your house, and if the bank doesn't pick you. Then your stuck renting and looking for another place.
 
You are getting bad advice from a listing agent who is trying to double dip the commission.  Sounds like they have their interests/pockets in mind when giving you the advice.  I would pass.
 
Getting the new loan would be difficult, do you have the income to support old mortgage + new heloc + new mortgage all at the same time?  Temporary situation for you but I believe lenders will see this as high risk. 
 
The only answer here would be to sell your home quickly.

If you need the equity to buy something else, you are going to have to do it anyways.

Short sales are notorious for taking a while to close so maybe you have time.

If not, then at least if something else comes up, you won't be contingent.

If you're worried about where you are going to live if you have sold your home and don't have another place to buy, you can negotiate a rentback, find a month-to-month rental or live with relatives. Those are all very stressful situations, but it gives you more flexibility.

Welcome to TI, good luck and let us know how it works out.
 
Anyone looking for a HELOC will need to be honest with the bank providing the loan when they ask if this is for an "owner occupied" transaction. It's not. The HELOC is to be used for the purchase of a new primary residence and the current home that the HELOC is going on will either be sold, or rented out.

Once the bank either hears this (or discovers it during the approval process....as is likely the case) isn't going to be for a long term primary residence, the HELOC's loan to value will be reduced to the point where it might not even be useful when and if approved.

It's important to get qualified for the purchase loan for the SS property. No sense making an offer, having it accepted, only to find out there isn't a way to buy. In today's market, SS bank approvals aren't taking 3 months to complete. It's often the case that a bank can approve the SS in mere weeks. Are you able to qualify to purchase carrying both home payments? Can you sell your current home in only a few weeks if the bank OK's the deal quickly?

If a buyer can show funds from a retirement plan, or family gifts, equal to 20% down AND provide a pre-approval letter from a lender, most banks will approve that SS offer to purchase. You don't have to liquidate the retirement or take family funds if your departure residence sells, but you'll need to be ready to do just that if the offer is quickly processed.

Can you take care of these two things this weekends and re-submit an offer?

 
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