Should I use hard money or traditional lending with clear title

Question

I Currently own over rental property with no mortgage. I'm looking to use said home as collateral to aquire another rental.my credit score b is 500. I've been denied twice once Navy Fed and once by a local bank here in Charleston SC.. what should I do..

Zillow zest: $76,363

Purchase price: $25,000 in 2015

Cosmetic Repairs only: $13,000 over 5 years

Zillow zest: $76,363

Purchase price: $25,000 in 2015

Cosmetic Repairs only: $13,000 over 5 years

Lawrence Snipe · Answer

@Stephanie P. Thank you very much

Matt M. · Answer

@Lawrence Snipe

Work on your credit before buying another property. You need good credit for everything, its so important.

Stephanie P. · Answer

@Lawrence Snipe

Not sure why no one is telling you to fix your credit.  It's imperative you fix what's driving your score to 500 and then move on and unfortunately, sometimes only time can heal a credit score. You have to distance your current self from whatever it is, a bankruptcy, a foreclosure, 90 day lates, judgements, collections or whatever.

Rates are credit and LTV driven.  Focusing on you as a borrower has to be your first step and then worry about moving forward with more properties.  It won't take long and it will save you a tremendous amount of money over time.

Best of luck

Stephanie

Kevin Romines · Answer

I agree with @Stephanie P.

Go back to the 2 lenders you were denied from and ask them if they have reports that can be pulled in connection with a Rapid Rescore? The programs we have are called the "Way Finder" & the "What If Simulator". These 2 programs will show you what you can do with your accounts, that will increase your scores both on an immediate basis as well as a time in the future i.e. 1-12 months time frame.

Work to get the score to a 620 at minimum. Then go take the steps the reports shows to take. Provide proof this was done, to your lender. The lender can then order a Rapid Rescore, and within 3 days, your scores will be improved.

Put the work in to correct your credit issue, this is the number 1 thing you should be concentrating on. If you don't, you will have non-competitive lending options.

I hope this helps?

Stephanie P. · Answer

@Lawrence Snipe

Absolutely you should.  From what I'm seeing, you have virtually no credit.  Go get a couple of credit cards.  Use them responsibly, meaning have a balance on the credit card of approximately 28% of the credit limit.  On a $1000 limit, have a balance of about $280.  After 90 days, I bet your score jumps dramatically.

Credit scores aren't necessarily based on having 0 balances but on how responsibly you use credit.  By paying off your balances, which makes sense to people such as yourself that are responsible, you aren't showing you can carry balances responsibly but that you can accumulate credit.  Get some credit cards, even store cards and make some payments on time and once your score goes over 650 or 700, you'll be borrowing at a much more affordable rate.

Glad you're in such good financial shape.

Stephanie

Lawrence Snipe · Answer

@Kevin Romines@Nicole Heasley @Stephanie P.

Thanks for the response....

according to credit karma I have

Navy Federal CU $524..in good standard

Credit one Bank $687 closed.. reported 2/27/2020

First premier Bank $547 closed..reported 11/03/2019

Electric and gas bill $179 closed

Commission of public works $0 closed

Dominion energy SC $179 closed

zZounds $179 closed

Side note: the house in question was gifted to me by my father. I have invested roughly $8,000 in cosmetic repairs, and I currently rent it out for $900 a month..

also I have 15K that i saved to assist me in my next investment.

Should I use a portion of the 15k to take care of my credit?

Lawrence Snipe · Answer

@Nicole Heasley @Stephanie P.

Thanks for the response....

according to credit karma I have

Navy Federal CU $524..in good standard

Credit one Bank $687 closed.. reported 2/27/2020

First premier Bank $547 closed..reported 11/03/2019

Electric and gas bill $179 closed

Commission of public works $0 closed

Dominion energy SC $179 closed

zZounds $179 closed

Side note: the house in question was gifted to me by my father. I have invested roughly $8,000 in cosmetic repairs, and I currently rent it out for $900 a month..

also I have 15K that i saved to assist me in my next investment.

Should I use a portion of the 15k to take care of my credit?

Nicole Heasley Beitenman · Answer

I half agree with Stephanie. We do need to know what's driving the credit issues to help. If it's something like divorce or sudden, large, unexpected medical debt, that's one thing. You may want to seek out hard money. If it's just terrible decision making, you need to hold off before getting into more properties.

Ian Walsh · Answer

It depends on how much time you have, your strength as a borrower, what your goals are etc.

Carter Crowley · Answer

@Lawrence Your only choice might be hard money with a 500 credit score. I know some of the larger hard money lenders have longer term refi loans

Should I use hard money or traditional lending with clear title

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