Contractor · Saskatoon Saskatchewan · Member since 2020 · 58 posts · 18 votes
Has anyone ever run into this issue and how do we navigate it?
We bought our first BRRRR deal as a bank foreclosure. Took weeks to clean it up and months to rehab. We fixed it up and put tenants in it and got an appraisal done for the bank. All the steps that Brandon and David talk about. We were using private money and had some left over. So not wanting that money to sit idle we purchased a second house that we could BRRRR once we refinanced the first house. All is good except that the day the bank is supposed to close the refi they tell us that all of lines of credit and credit cards need to be at zero to be approved! Now not wanting to sit idle while waiting for the banks we have started the second house rehab using the lines of credits and credit cards. How are we supposed to clear those up and why is this not told to anyone before they refi?! How are you supposed to have your cake and eat it too? It's takes money to rehab a property but your supposed to have money to refi?? Any advice would be appreciated. Thanks for now
Contractor · Saskatoon Saskatchewan · Member since 2020 · 58 posts · 18 votes
5y
@Jordan Perry thanks for the feedback. I have actually been in contact with another local mortgage broker who specializes in investors. She had been a huge help.
Lender · Lewis, CO · Member since 2017 · 218 posts · 159 votes
5y
It has to be a DTI thing. The reason they told you everything had to be at $0 was because that is the fix that the MLO worked out in order to get DTI back in line. If the same balances were on those credit cards at application then the MLO probably screwed up your income calculation and the underwriter recalculated accurately, and lower. If you ran up balances during the process then that's all on you because they might have done a soft pull to refresh the balances and that kicked DTI over the limit. There are parts of your application that inform you not to take on new debt during application, and if you do you need to notify them. Part of the reason you need to notify them is to avoid issues like this. Running up credit card balances counts as new debt.
Either way, the only thing it can be is a debt ratio thing. The mortgage broker you found likely has a better handle on the numbers and will do the math for you upfront vs being an idiot like 98% of MLOs...Good luck!