Credit score too low to Cash-out refinance

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Credit score too low to Cash-out refinance

Anthony Martinez
Rental Property Investor · Jacksonville Beach, FL · Member since 2015 · 6 posts · 0 votes

Hey guys,

I recently finished renovating some properties in Jacksonville, FL (Neptune Beach). I had to take out some lines of credit in order to fund the properties which I had out longer than intended due to Covid and it really hurt my credit as well. Now I'm having a hard time finding a lender to do a cash out refinance. The numbers make sense as I've laid out below, we did really well on the properties themselves, but I need to find a lender that can look at the end product of this refinance instead of a low credit score up front ( I've tried about 10 different banks). Any suggestions would be greatly  appreciated. Thank you!

Property Values: 3,020,000

1,300,000 (triplex 1) rental income: 6,250
1,300,000 (triplex 2) rental income: 4,000 ( we live in one unit which would rent for 2,600)
420,000 (single family) rental income: 2,400

Current Mortgages: 1,512,000
 560,000 (triplex 1)
 712,000 (triplex 2)
 240,000(single family)

LOC and credit card Debts: 245,000

(Property Values x 0.75LTV) - (Current Mortgages) = 753,000 - (Debts) = 508,000
$508,000 Cash out after all debts have been paid


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  • Alan Salgado
    Rental Property Investor · Derwood, MD · Member since 2016 · 46 posts · 17 votes
    6y
    • Call John R. Beard - Chairman & CEO BDC FUNDING in Palm Beach, Florida. I think he specializes in your type of situation.
    0Reply
  • Anthony Martinez
    OP
    Rental Property Investor · Jacksonville Beach, FL · Member since 2015 · 6 posts · 0 votes
    6y

    @Alan Salgado Thank you! Would you mind PMing me a contact?

    0Reply
  • Raymond J. RodriguesBusiness Member
    Lender · Miami, FL · Member since 2017 · 1k+ posts · 797 votes
    6y

    @Anthony Martinez where is your credit score floating around right now? 

    [email protected]619-456-8311
    Helm Mortgage Corp.5127 Reviews
    WebsiteView Page
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  • Eric Johnson
    Lender · Chicago, IL · Member since 2016 · 653 posts · 313 votes
    6y

    The problem is the LTVs. I can potentially see a fit with a DCR loan product, but a lot of my capital partners are capped @ 70% LTV on Cash-out refi's. Rate/term refis are going for 75%.

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  • Anthony Martinez
    OP
    Rental Property Investor · Jacksonville Beach, FL · Member since 2015 · 6 posts · 0 votes
    6y

    @Raymond J. Rodrigues I think it’s around 600. Nothing derogatory and all payments on time. The only negative is age of accounts and the debt that we are currently holding.

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  • Anthony Martinez
    OP
    Rental Property Investor · Jacksonville Beach, FL · Member since 2015 · 6 posts · 0 votes
    6y

    @Eric Johnson I've had banks that are willing to do 75% even on jumbo non-conforming loans since we would be over the limit but the hang up for them is the credit and same with a couple portfolio lenders - the DSCR is good ( around 1.2) and cap rate is about 6% but the credit score is the hang up. I spoke to a lender today who said he could probably do it in a year after the debt has had more time to mature. Of course I tried to explain how holding onto debt would accrue more debt rather than paying it off now with a debt consolidation refinance and having a perfect credit score by then...

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  • Zack KarpPro Member
    Lender · Schaumburg, IL · Member since 2015 · 833 posts · 774 votes
    6y

    @Anthony Martinez it's a frustrating catch-22, because once you restructure the debt, your credit scores would improve.

    Conventional and jumbo lending is out the window.  Your only option is a portfolio/hard money loan of some sort with a high interest rate, and likely points.  However, once you do that, and your credit score improves, you can then refi back to Conventional/jumbo loans.

    So it's an annoying 2-step process, which incurs more cost, but just bite the bullet and do it.  Cost of doing business, and the price you pay for covid issues and overextending yourself.  And make sure you don't get a prepayment penalty so you can get out as quickly as possible.

    Best of luck!

    847-387-5513
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  • Natalie Schanne
    Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Anthony Martinez - I had the same issue after financing a rehab with $50,000 of 0% apr credit cards. My score dropped from 820 to 650. It went back to 820 the minute I sold the house and paid off the credit cards. I didn’t pay any interest or have any late payments. Just high credit utilization (about 30% of my max and nearly 100% of some of these cards.) If you can get a family member or second lien to help you pay off the $250k in credit card debt in full immediately, your credit score will jump back up and be good enough within 30 days to complete a refi. Since you have equity I’m sure you can find someone who will make that bet.

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  • Alan Salgado
    Rental Property Investor · Derwood, MD · Member since 2016 · 46 posts · 17 votes
    6y
    Originally posted by @Anthony Martinez:

    @Alan Salgado Thank you! Would you mind PMing me a contact?


    I don't have a contact info. You can search for the business online. 

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