Is it possible to cash out property valued under $75k?

[Jennifer Schattle]

Hi, I just purchased a property for cash for $40K and put in $15K to rehab it. I already have a renter contracted to pay $750/ mo. I was looking at a DSCR loan but two lenders have told me they can't do a cash out refi if it's valued under $100K. Are there any lenders out there that are willing to do cash out from under 75K? I'm planning to transfer the deed into my LLC once the paperwork is cleared. Thx for your help!

[Jason Wray]

Jennifer,

You are having a hard time on that loan amount because that loan amount in most cases violates the "High Cost Rule" which means banks have to make a certain margin on every mortgage. This amount cannot change due to loan amount. So when a bank/lender has to charge a processing fee, underwriting fee, credit report fee, and still pay their banker/loan officer. The $75k cannot fit the margin built into the financing so the loan cannot be approved.

What you can do is you can get a non-secured loan for up to $50K if you have the credit score and income to support. Then when the property appraises for more after you have owned it for some time you can refinance it to pull out some cash and pay off the loan. The other options would be to get a secured line of credit and use the property as collateral.