Cash-out refi strategy? (1st bank denied me).

[Brandon Schlichter]

I currently hold two rental properties. One is in the final stages of being rehabbed and the other is done, waiting to be filled by a tenant.

I just applied for a refinance mortgage for the two properties and was denied due to having insufficient income to support the loan.

Personal income is ~$40k/yr
Rental income on these two will be $1675/mo
A good deal of cash reserves

FICO ~640

ARV of both properties is ~$160k , looking for $100k in refinance (62.5% LTV).

I'm waiting on the 'official' denial letter but did get a call from the branch manager stating that I was denied. I'll be looking at what all is on my credit report and if there's some loan/property in my name I'm not aware about, as I should have very, very little tied to my name in terms of monthly expenses/loans.

[Shane Johnson]

Potential problems

1- History - you should have shown other 2 rentals, and cash flow.
2- Debt to income - You should have a lease in place on the finished property. With this lease in hand, your bank would possibly consider that potential income, against the potential debt they are trying to qualify you for.

3- 6 months seasoning - doesnt matter if you bought it cash, if under 1 year, they will only use the purchase price, plus receipts for their valuation.
4- FICO score. Get it over 700 and your Debt to income and LTV requirements will be adjusted in your favor by quite a bit.

Example - I currently am not over a 700 and was only able to get 80% LTV, instead of 85% LTV (a difference of around $8,000 on my property)