Need private lender or miracle. Any suggestions?

Question

My situation is a giant catch 22. I borrowed a private loan to purchase my property almost 2 years ago, gutted it, fixed it up slowly, and was ready to refinance this Spring. Unfortunately during this time, I also maxed out my credit cards to cover expenses related to the rehab (stupid, I know). My mortgage broker was convinced we could get a FHA locked in, and the debt taken care of at closing with the cashout. I just learned that FHA dropped the loan because of the underwriting, and because of a couple of defaults I had earlier this year, which obviously reflected quite badly for my application. Not to mention my credit score obviously took a toll because of the high utilization. My broker's suggestion is to get the credit card debt taken care of and go conventional, but I don't have cash lying around to do that. Meanwhile, I'm stuck paying crazy interest still on my private loan and I still haven't paid it back, even though we're coming up on two years. No one I've talked to is willing to do such a small, private loan for a three month term, and I'm wondering if that would show up when applying for a mortgage. I feel like I'm stuck. Any suggestions? I'm open to all.

I've considered just selling the house and calling it done, but I'd rather not as this is my primary and not an investment property and there's just other headaches involved with that.

Thanks!

Matthew Crivelli · Answer

Defaults and revolving credit maxed out? If you do find a private lender willing to refinance this property it will only be because they plan on taking the property from you after you pay them closing costs and default. Get your head out of the clouds and sell the place ASAP. You are in no position to refinance this property. Not trying to offend just trying to get you to wake up my guy. @Peter Douglass

Matt Devincenzo · Answer

First you don't state what the actual loan amounts are, which would help in generating a more detailed solution. Second, have you considered a HML/private refi to cash-out? It will be expensive but probably pay for itself in the interest savings from the CC after a few months. That would allow your credit to rebound and then you could do a rate/term refi at the best possible rate when all was said and done.

Taylor Dasch · Answer

I'm in kind of a similar situation as well. My credit dropped due to too many inquiries. I can qualify for a conventional loan but dont have the reserves. I have a couple cards that I need to pay off to increase my credit. Hardly anything liquid right now. I am over leveraged but in the long run can make a great profit if I can just hold on to these two properties in hard money. Here is my plan:Plan A: I have 6 months on my HML left, I plan to pay my credit cards off, increase reserves by working OT at my W-2, refinancing with a conventional loan on each property with 25% equity. Pros: Great Cash Flow, Safest Option, Lower interest rates than alternativesCons: Not sure of the market in 6 months, Hard to pay contractors rn(I pay them then HML reimburses me - but I hardly have anything liquid rn) Plan B: Portfolio Loan- This may be where our situations differ, I am not too sure how many properties you have. I have 5 - Worth about a Million when the two in HML are fixed up. Loans will be about 780k total. If I cant qualify for a conventional loan, I will put all of my properties in a portfolio loan and hopefully be able to tap into the equity when needed to purchase more properties. ---Pros: 2nd Safest Option, LOC to scale rentals, All properties will be in one loan, medium cash flow. Cons: Higher Interest Rate, Shorter amortization schedule(20 years), Must have equity.Plan C: It sounds like you may have to use this one and it is not ideal IMO. Flip the property, and use the profit from that to pay your credit cards off, raise your credit, and get another property. Pros: Less Stress about this property, cash in your pocket, credit cards paid, ---Cons:You will have to keep working to get a buy and hold and scale your rental portfolio, where if you were able to hold onto it and leverage it for a cash out refi or HELOC, you would be able to tap into the equity to scale your rental portfolio. Either way, I hope you bought it right so that you do have some equity in it. Hope this helps!!

Dave Skow · Answer

@Peter Douglass- try to use some other source to pay the CC bills down ......401K loan / withdraw retirement funds ......family loan ....sell other assets ( car ) .....personal loan from your bank ......what is current credit scores ? Have you asked the lender on the present loan if they can lower theor rate / payment or offer an int only payment option?