Credit holding up refi

[Peter Fennig]

My business partner and I are trying to get a HELOC on a couple of properties, but the conventional financing route is not working for us because neither of us has a W-2 job and our credit score is to low because of lines of credit we used to rehab a number of properties we own over the last year.

Just a few weeks before making it to the closing table on refinancing a couple of our existing rentals that are not livable currently but under rehab, we found out that the refi was dead in its tracks because of our credit score. This has left us scrambling trying to satisfy the current hard money loans on those properties that are due in order to not lose the properties.  The properties were purchased as distressed  properties in B and A locations with the intent of value add through forced appreciation by rehabbing them ourselves. We own and operate our own contracting company and are both licensed contractors and have done this with many other properties prior. The difference this time is that we are out of time and our credit score has dropped significantly over the last year because of business lines of credit that were used mostly for rehabbing other properties. We're now ready to refinance but have 100K in lines of credit that needs to be satisfied or at least brought down significantly in order for our credit score to bounce back and to refinance into longer term financing. 

I guess my question is, what are our options here? Does anybody have or have had any experience in this sort of similar situation? We're in between a rock and a hard place and really do not want to lose the hundreds of thousands of dollars in equity these properties will land us... not to mention the cash flow they'll bring in! We've worked our butts off nearly 7 days a week most weeks for the last 2 years to get here . 

We currently listed three of our properties from our portfolio on the MLS, one of which is in a very high demand part of Fort Wayne that will get us the money we need to satisfy the credit card debt however not quick enough to save the existing couple of properties under rehab that we're trying to satisfy our hard money loans that are due. Any help for advice would be greatly appreciated

[Caroline Gerardo]

Re "making it to the closing table"

Your plan was to refinance out of hard money into something conventional or NonQM I assume. Your score dropped because all your lines of credit are max'ed. My guess the drop score reason is not just the max usage. Send me your credit report the full one and I can give you specific fixes to increase the score up. How low is middle score?

Second Major problem is you cannot refinance conventional on a subject property that is not inhabitable. If torn to the studs your options are: 1. ask hard money existing for extension and pay the fee 2. get new hard money and pay double the fees and rate increases probably with no cash out 3. sell some as is and use proceeds to finish the best location one and sell 4. family member money 5. wait and let everything implode 

Of the three for sale discount the list price and look for cash buyer only.

Ask for extension on credit cards and car loans and everything. Make partial payments twice a month. 

Credit repair takes months, be realistic about what you can scrimp on. Get a second job. Sell things. Try and finish the rehab of the one best property you intend to save. Yellow notepad- write out a plan, have your wives/daughter/or mother review the steps to make sure you have a daily positive list to cross off. To get a HELOC you need 720. Take some short term construction jobs and ask for 30% up front and do that work at night if you must. You can do this. You have the strength and creativity, it is in your lion hearts. You are going to work 70 hours a week, eat healthy, get it done, and be kind.