Can i pull money out of property with bad credit?

Pittsburgh, Pennsylvania
Creative Real Estate Financing
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Can i pull money out of property with bad credit?

Jodi Paulovich
Rental Property Investor · Pgh/NYC · Member since 2014 · 8 posts · 8 votes

Hi, i currently own a 3 family with a 4% mortgage, which is doing very well. I am about to purchase a SFH foreclosure for $65k cash (this week), and wanted to find out if there was a way to pull out some cash to pay down debt since it will be paid for? My credit score is only 603. Also, the first property is in an LLC, and this one will be purchased in another LLC.

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Andrew PostellPro Member
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
2y

@Jodi Paulovich thanks for the post.  I appreciate any time someone is looking to help but the scenario you are describing would absolutely be declined by a bank.  No traditional lending institution would grant you a loan if your credit score is really 603.  That doesn't mean you can't get a loan, but just not through a bank/institutional lender.

My suggestion here is that if there is any chance of success it would  need to go through a private person.  However, this space has it's issues as well.  There are many a dubious person lurking in this lending arena so we need to protect ourselves as best as we can.  Let's reach out to some other investors in the market of the subject property.  Go to facebook and search for "Real Estate Investor (with whatever state the property is in) and join some of those local groups.  You can even substitute the city (or a close city) for the state and join those.  And then we ask for investor recommendations.  Again, I appreciate whenever someone is offering to help and promoting their own company...but how do we know they are any good?  And while not foolproof, getting a recommendation from another investor is what we need.  That's kind of what you were doing here...we just need it on a more local level for you.  Ask about private lenders and see which people/companies get recommended.  

Hope all of that makes sense.

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  • Carl Millsap
    Investor · Midwest · Member since 2019 · 358 posts · 238 votes
    2y

    Sure, when you close on the SF Foreclosure refinance it once you have it ready to rent or whatever you plan to do with it. I can't imagine a bank declining to loan against it. 

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  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @Jodi Paulovich thanks for the post.  I appreciate any time someone is looking to help but the scenario you are describing would absolutely be declined by a bank.  No traditional lending institution would grant you a loan if your credit score is really 603.  That doesn't mean you can't get a loan, but just not through a bank/institutional lender.

    My suggestion here is that if there is any chance of success it would  need to go through a private person.  However, this space has it's issues as well.  There are many a dubious person lurking in this lending arena so we need to protect ourselves as best as we can.  Let's reach out to some other investors in the market of the subject property.  Go to facebook and search for "Real Estate Investor (with whatever state the property is in) and join some of those local groups.  You can even substitute the city (or a close city) for the state and join those.  And then we ask for investor recommendations.  Again, I appreciate whenever someone is offering to help and promoting their own company...but how do we know they are any good?  And while not foolproof, getting a recommendation from another investor is what we need.  That's kind of what you were doing here...we just need it on a more local level for you.  Ask about private lenders and see which people/companies get recommended.  

    Hope all of that makes sense.

    3Reply
  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 676 votes
    2y

    Jodi, I would find a co-signer to qualify for a better rate. Partner up with them on and use LLC % rule to qualify.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Jodi Paulovich

    What is the loan to value? Most lenders won’t go above cltv of 65-70% today

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  • Ron S.
    Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
    2y

    A cosigner isn't going to help and neither is a 603 FICO. You wouldn't be on the loan with that credit score and at that loan amount, with that score, i don't see any financial institution that would be interested.

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  • John Clark
    Member since 2018 · 1k+ posts · 1k+ votes
    2y
    Quote from @Jodi Paulovich:

    Hi, i currently own a 3 family with a 4% mortgage, which is doing very well. I am about to purchase a SFH foreclosure for $65k cash (this week), and wanted to find out if there was a way to pull out some cash to pay down debt since it will be paid for? My credit score is only 603. Also, the first property is in an LLC, and this one will be purchased in another LLC.

    As others have said, if your credit score is 603, then you’re toxic waste to any bank. That leads to the question of how can you be 603 with $65k in cash to buy a house? So start with asking why are you 603? Then ask what your plan is for the loan proceeds, and how can you make the bank feel safe (which partly goes to why are you 603) that it would get its money back without the sturm und drang of foreclosure and such. 

    you may be better off using that $65k to pay off/down the debts that drove you to a 603 in the first place. If you don’t want to do that because you are hostile to the creditor(s) then the bank won’t touch you no matter how your investment numbers line up: It would have to assume that it would be next on your list. Even a lockbox arrangement would be insufficient protection from the bank’s point of view.

    so first things first: how did you get to 603, and how do you propose to protect the bank from the force that drove you down?
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