Buying with equity?

[Nate Downs]

Hello BP, I am currently buying a 480 sq ft house that needs a bit of TLC. The lender I am working with at the moment is telling me they probably won't give me a conventional loan as a rental due to the size of the house and they think there will be a lack of comparibles. I would pay 20% down. I told them I would get it appraised and if it didn't appraise for what I offered then the seller could lower the price to the appraised value or I would walk away. I have enough equity in another property to buy with equity loan. It would be a six year ballon 20 yr ammortized interest rate of 3.25%. I asked if I fixed the place up and refinanced in a couple years would that be an option. She said yes. Why would I be able to refinance in the future when she hasn't even seen the property....confusing? I'm buying the house for 19,500. My question is should I consider looking for another lender? Why is this an issue? I have a very good relationship with this bank and not sure if this is something they can control or they are choosing to deny me the option. Also, if I buy with the equity loan I will only have about 75 bucks in cc and no down payment which is attractive. Any advice on the bank aspect of this as well as the deal aspect is greatly appreciated. What would bigger pocketeers do? Thanks.