Refinance Concern for a BRRRR

6 Replies

Hello,

I was turned down by three bigger credit unions in my area when I tried to get a HELOC. I finally got a approved by a neighbor credit union recently, and I ended up getting the lowest interest rate; so it turned out to be a blessing. I have credit score above 730, and no credit card debt. My debt to income ratio is pretty good, not great. My car was recently totaled in accident, so I have a car payment for the first time in over a decade. The reason I was getting denied was that I was late on five mortgage payments the last few years and for a credit card I had back in 2016 (while I was in grad school). Long story short on late mortgage payments was that I can't set up direct payments, and there's been times where I've went to pay and the bank's site has been down so then it slipped my mind. I was never late more than a month. Totally stupid, but it wasn't until I started trying to get a HELOC that I learned what a big mistake it was to be late on mortgage payments.

So anyways, not perfect credit history, but strong in credit score, debt:income, and income (salary). My original plan for the HELOC was to use some of my equity to put a down payment on my first rental property. After learning more about the BRRRR strategy (thank you Brandon and David), I realized that it might be beneficial to use the HELOC for repairs and capex for a property, and initially finance through a hard lender. I'm nervous though, that I could run into issues with a bank trying to refinance because of the same issues that popped with my pursuit of a HELOC. Part of me feels like I could prevail with refinancing, just like I had to with a HELOC...keep taking no's until I get a yes. I'm curious to hear more from experienced REI's though.

Thanks so much for your time and assistance!

@Daniel Murphy if you were never more that a month late on you mortgage it normally wouldn't even show on your personal credit report.

Your best bet for refinancing an investment property is going to be a local smaller bank. They often hold their own loans (called a portfolio lender) so they make up their own rules. Avoid big national banks. 

We run a lot of credit reports for perspective tenants and to be honest I am surprised your credit score is still 730 when youve missed 5 relatively recent mortgage payments. 

Have you talked to lenders about the refinance? I would check if those late payments would present a challenge in you getting approved. Definitely check on that first. 

Originally posted by @Ned Carey :

@Daniel Murphy if you were never more that a month late on you mortgage it normally wouldn't even show on your personal credit report.

Your best bet for refinancing an investment property is going to be a local smaller bank. They often hold their own loans (called a portfolio lender) so they make up their own rules. Avoid big national banks. 

Hi Ned (and everyone else) - Is it likely for a smaller local portfolio lender to lend on investment properties owned outright to a borrower with a high DTI ratio? The properties are owned by their LLC, but I'd imagine the DTI of the actual borrower will still come into play?