Personal Loan to Refi Mortgage?

[Grant Mitchell]

Is it possible to purchase a property and rehab it with a personal loan then get it refinanced with a traditional mortgage? I always wondered since places like SoFi and other personal lenders give such large amounts with not much paperwork. Obviously the pitfalls would be the interest on the loan and the monthly payment. Just wondering if I could add this method to the toolbox in a bind. Thanks!

[Chris Lohmeier]

This is absolutely possible. I did this with Sofi in a roundabout way on one of my last purchases. You do have to be careful in that Sofi will not give you a personal loan to use as a down payment or for the purchase of a property, but they have no problem lending for home improvements, and as you stated, they don't ask a lot of questions. You already noted some of the pitfalls but you'll also want to take into account that your credit will take a hit as the loan is unsecured, and your DTI will look pretty rough because of the payment amount. I'd advise talking to your refinance lender first. Though I'm guessing you could get around most of these problems by signing a letter from your lender that promises to payback the personal loan with the proceeds from the refi.