Posted by LJ on January 11, 2002 at 08:18:59:
I have asked this question twice recently and it seems that nobody wants to deal with this. Perhaps we have found the ‘catch’ in the much-glorified LOC plan. My bet is that this purchase-on-LOC-then-refi idea is limited to a scant few people who can pull it off. Many have said it is not for someone without a track record and this is true. Besides a track record, Id wager you have to be quite rich or have a huge income to cover the debt ratio.
It is a big concern that one might get the LOC, buy a 50K property with it, then NOT be able to refi it into a mortgage because he has too much unsecured debt(and not an enormous income).
Since asking about this theory got no real responses, maybe this post that “it probably can’t be done by most of us” will provoke a rebuttal and explanation. I’d LOVE to get a great answer to this problem. Please, people, if one exists…lets have it!