How Do I Refinance Cash out if you have bad Credit

Question

Hi I'm trying to find A way to refinance cash-out loan on a Duplex I have, but I have bad Credit. I'm New to this website and real estate as well. I'm a General contractor and I have couple property's where I will be building 22 United as soon as I can. so on the mid time I'm trying to build my portfolio. I have been studying real estate for over 2 years now and I have been applying what I have learn so far, but I know there's people how WALK the TALK. If some one knows a way to help I'm open to hear them.

Brittany Minocchi · Answer

Do you know what your scores are? There are programs that don't even look at FICO, but you'll be limited to something like 50% LTV....so you need to have significant equity. Aside from that (again, depending on score) you may be better off doing a bridge loan to pull what cash you can now, work on credit, and refinance into a long-term loan once credit has improved and before the balloon is due (typically at 12 months).

Sandy Hu · Answer

A few high-level points that may help:

1. “Bad credit” doesn’t automatically kill all refinance options. Traditional banks will be tough, but many DSCR / asset-based lenders care more about:

• property cash flow
• current rents vs debt service
• LTV and condition than personal credit alone.

property cash flow

current rents vs debt service

LTV and condition than personal credit alone.

2. Cash-out refis are harder than rate-term when credit is weak, but not impossible. Most non-QM lenders will:

• limit cash-out proceeds,
• require lower LTV (often 65–70%),
• and price the risk with higher rates/fees.

limit cash-out proceeds,

require lower LTV (often 65–70%),

and price the risk with higher rates/fees.

3. A common path I see work:

• stabilize the duplex (leases, rents, condition),
• refi into a DSCR loan based on income,
• then improve credit over 6–12 months to refi again into better terms.

stabilize the duplex (leases, rents, condition),

refi into a DSCR loan based on income,

then improve credit over 6–12 months to refi again into better terms.

4. Your background as a GC is actually a plus, especially if you can document value-add work and stabilized rents — lenders like predictable income.

If you’re open to it, the key questions that determine feasibility are:

• current rents vs projected rents
• property value and target LTV
• how recent the credit issues are (late pays vs major derogatories)

current rents vs projected rents

property value and target LTV

how recent the credit issues are (late pays vs major derogatories)

Happy to share what I’ve seen work in similar situations — and just as important, what usually doesn’t pencil.

Diego A. Beltran. · Answer

This was really helpful I really apricate it.

Stacy Raskin · Answer

There are DSCR cash out refinance options down to a middle mortgage FICO credit score of 620. The LTV will be lower for the loan. There can't be more than one mortgage late for the last year for most lenders. Some DSCR lenders really focus on mortgage payments and don't care as much about missed credit card payments etc as long as the credit score meets the program guidelines.

Another option it to be in an LLC with another person who has better credit. Some lenders will require any LLC member over 20% to be on the loan.

It's helpful if you work with a mortgage broker that specializes in DSCR loans as loan program guidelines vary and it can be helpful to find the right program for you as the programs generally aren't advertised directly to the public. Happy to connect to discuss further.

Erik Estrada · Answer

Hey Diego,

This really comes down to why you have a low credit score. Most lenders will frown upon serious delinquencies, mortgage lates, and multiple consecutive late payments.

If the property is owned in an LLC, most DSCR lenders will only require 1 PG and they need to be the majority owner of the entity. Others will use the owner with the higher FICO score to qualify as long as the other member has a 600 score or better.

Diego A. Beltran. · Answer

I really appreciated, you guys are really helpful, I probably will work on my credit on this one to get better dials. and the duplex it cash flow $3,100 before expenses

Chris Seveney · Answer

Financing with bad credit is going to be very difficult and very expensive. I agree with other posts like Patrick on why is credit bad. What my recommendation would be is while you continue to learn, focus on cleaning up your credit and getting stuff in order - once you get into real estate most things dealing with money get harder not easier and harder f your house is not in order now it's only gonna get worse

Matthew Bernal · Answer

Welcome and respect for actually building and executing, not just studying.

Cash-out refis with bad credit are tough through traditional banks, so most options end up being asset-based or transitional in nature. In those cases, lenders usually care more about the property’s equity, income, and exit plan than your personal score, but the tradeoff is higher cost and shorter terms.

A couple things that would help clarify what paths even make sense:

Is the duplex currently rented, and does it cash flow?

and Are you looking for short-term capital to bridge into a longer-term refinance, or long-term debt right away?

Those details usually determine whether a refi is realistic now or if it’s more of a two-step process.

Patrick Roberts · Answer

What are you defining as "bad" credit, and what caused the issues? For instance, a 660 caused by high utilization is a very different thing tha 600 because of recent mortgage lates.

Derek Alexandrenko · Answer

Generally its a sliding scale... the lower the credit, the lower the cash out LTV. Many lenders won't do a cash out refi below 680.

How Do I Refinance Cash out if you have bad Credit

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