Wholesaler · Sterling Heights, MI · Member since 2014 · 335 posts · 105 votes
Hi everyone,
I have a dilemma on my hands and I'm looking for some advice. I have a duplex in a very desirable neighborhood in Michigan. It's never vacant because of the location and because of the condition. I purchased this on land contract and spent about $20K on repairs. I ran out of cash and place the repairs on my credit card. I maxed out 2 credit cards getting the duplex rent ready.
My issue is that the duplex consistently rented and making money, but my maxed out credit cards are killing my debt to income ratio. My credit is good and I'm making payments, but just not enough to bring the ratio to a level that is deemed "worthy" to a traditional lender. Are there any lenders out there that will refi my out of a land contract but won't charge me 9-10% at 30 year?
I have a dilemma on my hands and I'm looking for some advice. I have a duplex in a very desirable neighborhood in Michigan. It's never vacant because of the location and because of the condition. I purchased this on land contract and spent about $20K on repairs. I ran out of cash and place the repairs on my credit card. I maxed out 2 credit cards getting the duplex rent ready.
My issue is that the duplex consistently rented and making money, but my maxed out credit cards are killing my debt to income ratio. My credit is good and I'm making payments, but just not enough to bring the ratio to a level that is deemed "worthy" to a traditional lender. Are there any lenders out there that will refi my out of a land contract but won't charge me 9-10% at 30 year?
Looking for some advice and help.
You need to find a loan officer or mortgage broker with an IQ greater than a cabbage, licensed in your state (I am CA only), that can set it up so the credit cards are paid off through escrow with proceeds from the cash out refinance. This is a very basic 101 level trick approach (not even a trick)...
One of my first "doing God's work" refinances when I was fresh off of the Loan Officer Assembly Line was a dude that went $80k (or some crazy number) in debt taking care of his dying mother. The cash out refinance brought his DTI down to 38% from 72%, and his monthly debt servicing expenses decreased $750 per month (!!!). We put $40k in his checking account while we were at it. She has since passed away, but her final months were better than they otherwise would have been, and her son's financial health certainly a crap ton better than it would have been (I caught him right before he was going to start missing payments, disqualifying him from any mortgage because his FICO was already shaky as it was). I'm probably always going to remember that deal, and that guy's name who was doing whatever it took to take care of his mom while his siblings slacked off.
Specialist · Ann Arbor, MI · Member since 2016 · 355 posts · 191 votes
10y
I am also in the process of finding a lender to refi/payoff a land contract. Quicken Loans has a 6 month seasoning requirement. Bank of Ann Arbor and Ann Arbor State Bank and Huron Valley Financial apparently do not have those seasoning rules, so try them. I don't know if it being a duplex makes a difference. It seems like they should allow you to payoff the credit cards when you refi? Or now that it is repaired and rented, can you get a HELOC for cash out and then refi and pay off the land contract and HELOC?
I'd like to hear from others if they know of lenders who will also refi land contracts in Michigan.
Investor · Roseburg, OR · Member since 2016 · 28 posts · 17 votes
10y
I am looking at financing with Phyllis Brown a private lender. I have not gone through the process but am looking into it. I have just begun due diligence to ensure she/it is a real entity before submitting my personal info as I am paranoid of ID theft, but it looks legit so far.
Ann Arbor, MI · Member since 2015 · 31 posts · 8 votes
10y
Make sure you're working with an accredited Mortgage Broker. Banks are limited and Quicken loans backs out of the deal at the 11th hour, trust me, I refuse to accept an offer with a QL and it's the regular buzz in the office that 'another deal fell through.' That Q pre approval is worth no more than the paper it's written on. If you need a Mortgage broker that's legit, call mine.
Wholesaler · Sterling Heights, MI · Member since 2014 · 335 posts · 105 votes
10y
thanks @Shaun Weekes the problem with that is my DTI is high. That's why I've been getting rejected. Most of the lenders tell me that. The irony is that I have so much equity that if I do a refi I can pay off all my cards and car note. Pretty eliminate most my debt.
Wholesaler · Sterling Heights, MI · Member since 2014 · 335 posts · 105 votes
10y
@Middy Matthews thank you. I'll try anything but most lenders have closed the door on me. They said the DTI is too high. But please PM the info. I'll try anything.
I have a dilemma on my hands and I'm looking for some advice. I have a duplex in a very desirable neighborhood in Michigan. It's never vacant because of the location and because of the condition. I purchased this on land contract and spent about $20K on repairs. I ran out of cash and place the repairs on my credit card. I maxed out 2 credit cards getting the duplex rent ready.
My issue is that the duplex consistently rented and making money, but my maxed out credit cards are killing my debt to income ratio. My credit is good and I'm making payments, but just not enough to bring the ratio to a level that is deemed "worthy" to a traditional lender. Are there any lenders out there that will refi my out of a land contract but won't charge me 9-10% at 30 year?
Looking for some advice and help.
You need to find a loan officer or mortgage broker with an IQ greater than a cabbage, licensed in your state (I am CA only), that can set it up so the credit cards are paid off through escrow with proceeds from the cash out refinance. This is a very basic 101 level trick approach (not even a trick)...
One of my first "doing God's work" refinances when I was fresh off of the Loan Officer Assembly Line was a dude that went $80k (or some crazy number) in debt taking care of his dying mother. The cash out refinance brought his DTI down to 38% from 72%, and his monthly debt servicing expenses decreased $750 per month (!!!). We put $40k in his checking account while we were at it. She has since passed away, but her final months were better than they otherwise would have been, and her son's financial health certainly a crap ton better than it would have been (I caught him right before he was going to start missing payments, disqualifying him from any mortgage because his FICO was already shaky as it was). I'm probably always going to remember that deal, and that guy's name who was doing whatever it took to take care of his mom while his siblings slacked off.
Escrow Officer · Temecula, Ca. · Member since 2016 · 418 posts · 152 votes
10y
I totally concur with @Chris Mason...how hard is a cash-out refi that will pay the debt off that is causing the DTI issue? Seems almost too simple, so I wonder if there is another issue at hand.
Investor · Fenton, MI · Member since 2015 · 142 posts · 46 votes
10y
@Emilio Basa, not a quick fix, but could potentially provide some relief from high interest rates. If your credit is good, can you get another credit card? If so and you can get one that has one of those introductory interest rates of zero for say 18 months or so, get that card, transfer your balances to that card. While it is at that low intro rate, you will pay down much quicker and after 18 months or whatever the low interest introductory term is, if you have a zero balance on the one you currently have, perhaps they will send you balance transfer checks for a similar low rate etc. Then just keep flipping the balance back and forth until paid down. I have done this and it does work, but you have to have good credit and you have to be able to get high enough credit limits that you hopefully don't max out the second card as well. Just another option to consider if all else fails. Good luck to you!
Escrow Officer · Temecula, Ca. · Member since 2016 · 418 posts · 152 votes
10y
@Emilio Basa, your should try calling the company that @Middy Matthews suggested, since you are both in the same state and a referral is usually worth its weight in gold. I don't know of any lenders that I work with who handle your state.
Thanks @Chris Mason! It would be great to find a lender who does that. Seems pretty silly doesn't it? The cash out refi will be able to pay off 3 cards and my car note with money left over to put down on another property! I've been to 4 lenders so far and have been turned down. Not sure if I should reach out to even more lenders. I'm talking to Lima One Capital right now. Not the best %, but if they approve me then why not?
@Shannon Wright - Every lender has told me DTI. My credit is good. Mid 700s, but probably low 700s now because of all the credit report inquiries.
Who is your realtor's go-to lender? I guarantee you that this guy or gal has an IQ greater than a cabbage. For wonky situations, every experienced realtor out there has already done this shopping local to you.
Investor · Woodstown, NJ · Member since 2014 · 123 posts · 43 votes
10y
@Emilio Basa I have also run into this issue and really just needed to struggle through it for a year until I could include the income on my taxes. Having said all that, I have since developed a relationship with a commercial lender that I game plan with before I purchase into a situation like this. Typically I find that they don't work with credit scores and DTI as their only metrics and many times they underwrite a little more holistically based on metrics and situation / relationship. It never hurts to have a small chunk of cash in their bank either :)
Wholesaler · Sterling Heights, MI · Member since 2014 · 335 posts · 105 votes
10y
@Jon Lafferty - Where did you find your commercial lender? I'm mostly looking at 4 plex multi units right now but eventually I'd like to step up my units so I will need to talk to a commercial lender. Not even sure how commercial loans work.
Investor · Woodstown, NJ · Member since 2014 · 123 posts · 43 votes
10y
@Emilio Basa I invest locally so for me I found it easiest to call banks that are local to my community and then expand to a 50 - 100 mile radius. I work with 1 bank in my local metro of Philly and 2 local community banks in Southern NJ. I have found that after 1 solid deal banks were willing to expand their offerings to me.
When I found a local lender that was willing to work with me I made sure I scheduled time for a face to face visit to explain my business model and further cultivate our relationship. I think it can be invaluable to make a personal connection with lending professionals because they are then able to help sell you to underwriting.
Investor · Woodstown, NJ · Member since 2014 · 123 posts · 43 votes
10y
Hey @Emilio Basa , my commercial lenders don't use DTI as their only metric however it is a part of the underwriting pie so to speak. The banks want to see that the asset is performing well and can pay for itself. In addition to that they have checked my DTI, reserves, credit etc.
I don't show them a business plan any more however my first loan with my main commercial lender I went in with a powerpoint presentation (printed) and a few spreadsheets. You should be prepared to sell them on why they should do business with you and why you are a good risk.