Line Of Credit
Hi this might be a pretty dumb question but can someone explain to me how a line of credit works and can I use the line for the down payment and use the same bank to finance the rest of the loan??? Is this easy to do?? My credit is excellent. Thanks
Nope...not a dumb question at all
What you want is an unsecured, signature line of credit (LOC). It is "unsecured" in that there is nothing to foreclose or reposses if you default, and "signature" in that you simply write a check to draw off of your credit line. There are typically fees associated with each draw. The interest rates and fees will make it somewhat cost prohibitive to finance your down payment, if that's even allowed by the LOC.
I've only looked at two banks so far, and opened an account with one. Bank of America forbids the use of their line for the purchase of real property, so you wouldn't be able to use it for purchase (you could use it for rehab materials, though). But the account I opened is a 20K line at MBNA and was a cinche to get started. I haven't actually used it yet, but it's nice to know it's there just in case I need some fast cash for something unexpected. There's no cost whatsoever to let the account just sit there unused (BofA had an annual fee...bleh :-o ).
Find some other way to raise cash for a down payment (I'm assuming this is for a personal residence?) like birddogging or wholesaling. If buying for investment purposes, try to find creative ways to minimize or eliminate altogether the need for a down payment (trades, seller carrybacks, etc.)
Thank you so much for your quick response and your great help. I do have another question, Lets say i wanted to do an 80-20 loan. Would there be any chance of a bank putting up the 80, and the seller carrying the other 20??? Would a bank do this or would some money have to come out of my pocket for a NOO?? Thanks again
Interesting topic. Continuing on from the original question, does anyone know whether a line of credit is reported to the various credit agencies and if it affects your FICO score? What about if you get the line of credit but don't use it? Thanks.
I have a lender that will set you up a line of credit to purchase homes.
Yes the line of credit is usually reported to the credit bureau's and will affect your FICO score. If you don't use it, it will show as an open account with a zero balance. Your balance will update monthly as you use and pay off your credit line.