Unusual Owner-occupied scenario

3 Replies

I have a bit of an unusual scenario... My wife and I own our home free and clear with no mortgage (reside in Ohio). We are looking for a loan of $150K to pay off unsecured debt that has fallen into various stages of collections/delinquency. Our combined annual income is approximately $75K, and both of our credit scores are right around 500, due to the delinquent unsecured debt. As I stated up front, we do own our home free and clear, and I estimate it to be worth anywhere between $275K-325K, depending on how conservative an appraisal might be.

So my question is, given the equity in our home and despite the terrible credit scores, are there any loan options us? We would be looking to carry this loan for 12-36 months while we repair our credit, then refinance to a traditional mortgage hopefully with higher FICOs.

Curious to hear any and all thoughts. Thanks in advance.

@Jeff Anderson there are mortgages out there that will lend down to a 500 credit score but if you have delinquent debt they will be very hard to qualify for.  My suggestion would be to look for a private person to lend you this money and place their lien on title (like a mortgage) so if you stop paying their loan they will be able to foreclose and get your house (like a mortgage).  The other option is to just sell you home outright.  You'll get 100% of the proceeds and then you can pay off everything.  You can then downsize and buy a different home with cash and not need a mortgage again.  Hope this helps in some way.

Thank you for replying, Andrew. We have considered selling to take the cash, pay off the debt, and find a rental (with lease-option) or seller-financed house. But our overwhelming first choice is to stay in our home. Any advice on how to find a private person to lend this amount of money?

Not sure why you would move unsecured debt to secured. Have you tried negotiating a payment plan? do you have a 401k from which you can get a loan?

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