How EB-5 Investors Can Prove Source of Funds With a Home Equity Line of Credit (HELOC)

EB-5 investors can source investment funds through several means—provided they can prove the funds were obtained legally. United States Citizenship and Immigration Services (USCIS) allows prospective EB-5 investors to use funds from earned income, asset sales, loans, gifts, inheritance, and more for their EB-5 investment.

However, a home equity line of credit (HELOC) remains one of the most common sources of funds for EB-5 applicants who have resided in the U.S. for a long time on H-1B, E-2, or L-1 visas. This is because they’ve lived and worked in the U.S. long enough to purchase homes, and they want to tap into their home equities to obtain permanent residency through an EB-5 investment.

In this article, we’ll look at how EB-5 investors can prove source of funds with a HELOC and therefore successfully use it to fund their EB-5 investment.

What Is a Home Equity Line of Credit?

A HELOC is a revolving credit line secured by the borrower’s home equity. It involves tapping into the unrealized gain on home equity with a bank loan and then investing that amount in an EB-5 investment vehicle. HELOC loans are a common source of funds for EB-5 investors already in the U.S. on non-immigrant visas.

How a HELOC Loan Works

HELOC loans offer homeowners a means of making gains from the increase in the value of their home without selling it. There are two components to a home purchase in the United States:

• A down payment – usually about 20% of the value of the home.
• A mortgage – a continuing payment that you fund using your regular income.

For example, say you purchased a home worth $500,000 in 2019. You most likely made an upfront down payment of $100,000 (20%). The remaining $400,000 balance would be funded by a 30-year mortgage with a bank. Today, that property could be worth about a million dollars, so you have a gain of about $500,000.

The way to gain from that increase—outside of selling the home—is to take out a HELOC. A bank will appraise your property to verify that you have that much gain, and then they’ll allow you to pull that gain out without selling the property. You’d then be making regular payments to pay that debt down.

Proving Source of Funds for HELOC

When you purchase a house, you’ll be issued a home closing disclosure, among other documents. This disclosure is issued by the mortgage lender that lends you the $400,000 balance to fund your home purchase. The home closing disclosure covers the financial details of the purchase, including how much money you deposited as a down payment and whether it was a single or multiple deposit.

Let’s say you made an initial deposit of $60,000 to an escrow account and later made a closing deposit of $40,000 to cover the down payment. In examining your source of funds, USCIS will look at these numbers and say, “Tell us how you got the $60,000 and the $40,000 to make this purchase.” They essentially want an accounting for the $100,000 down payment.

When building out the source-of-funds documentation, your immigration attorney will go through seven years of your bank records. If you purchased the home in 2019, they’ll most likely analyze your bank statements from 2017 to 2019.

They’ll extract all the salary receipts and savings you made within that period to show USCIS how you got the initial $60,000 deposit and the $40,000 deposit. The government is looking for a spike in your bank statement right before you made the purchase. They want to ensure the money didn’t come from a third party or any other source. If you received money from another source, you’ll have to document what that source is.

For the mortgage that you used to fund the rest of the purchase, in this example, you need records from 2019 to 2024. You must provide your W-2s, tax returns, and bank statements showing your salary receipts and all the mortgage payments you’ve made between 2019 and 2024. These two sets of documents (the 2017–2019 and 2019–2024 records) show the government that the funds for your home purchase were legally sourced from your employment income.

Best Practices When Using HELOC Funds for EB-5

The following best practices will ensure a smooth EB-5 source-of-funds documentation process when using a HELOC to fund your EB-5 investment.

Work With an Experienced EB-5 Immigration Attorney

Proving legal source of funds requires extensive documentation, something most investors may be unable to provide independently. An immigration lawyer experienced in EB-5 adjudication understands the nuances of EB-5 source-of-funds documentation and what kind of documents USCIS expects to see.

Your immigration attorney will ask you questions like “When did you make the purchase? Did you take money from friends and family to make the purchase? How have you been funding the mortgage payments?” Your answers to these questions will enable them to determine what documents you’ll need for your source-of-funds package.

Borrow From a Licensed Financial Institution

Sourcing your HELOC loan from a licensed financial institution is crucial to avoid a request for evidence (RFE) from USCIS. Page 9 of Form I-526E explicitly says, “If you are tapping into a home equity line of credit or a loan, we need source of funds documentation for the donor or lender if that institution is other than a bank.”

This means that if you’re taking out a HELOC from an institution that is not a bank or credit union, you’ll have to provide documentation showing that the institution sourced its funds lawfully.

Many EB-5 investors are tempted to take out HELOCs from online lenders because they tend to give out more money than banks. While the prospect of getting more money on an equity line of credit is appealing, doing so further complicates the source-of-funds requirement.

Let’s say you take out a HELOC from a lender that is not a bank. Because it does not have “bank or credit union” in its name, USCIS requires that you provide source-of-funds documentation for the lender. You’ll need to provide the lender’s bank statements and tax returns to show how they got the money to lend you. And this is usually impossible to obtain from online lenders.

If USCIS somehow overlooks that requirement and approves your I-526E petition—which is unlikely—they can still issue a request for evidence two years later when you file your Form I-829. If this happens, you’ll have to provide the lender’s source-of-funds documentation or risk losing your EB-5 Green Card.

Ensure the EB-5 Project Has a Robust I-526E Denial Refund Guaranty

While all investors should look for investment safeguards, an I-526E denial refund guaranty is especially important if you decide to obtain a HELOC. This guaranty ensures that you will avoid losing your money if USCIS denies your I-526E petition because of inadequate source-of-funds documentation.

Analyze the project’s offering documents carefully to ensure there is a clear refund guaranty. Many projects have flimsy guaranties that read, “We will refund your money if we can,” or “We will look for another investor to replace you.” These statements do not guarantee anything, and you should avoid such projects—or else you risk losing your money without getting an EB-5 Green Card.

Partner With EB-5 Professionals for a Smooth Process

Like other EB-5 sources of funds, HELOCs require detailed documentation to prove the legality of your funds—including establishing that the funds for purchasing the home, whose line of credit you’re drawing from, were legally obtained.

If you plan on using a HELOC to fund your EB-5 investment, you’ll need the assistance of experienced EB-5 professionals to identify and collect the required documents.

For guidance on navigating the EB-5 program, schedule a free one-on-one consultation with EB5AN today. We provide first-rate, low-risk EB-5 projects with a 100% USCIS approval rate to date and have helped over 2,300 families become U.S. permanent residents through the EB-5 program.