How who YOU fund this deal?

[Avery Bernstein]

My husband and I own our current home free and clear. It needs work (mostly cosmetic) to bring it up to par in order to rent. It will rent as a 4/1.5. About $1000-1100 in our market. We have attempted to get a HELOC for debt consolidation and to finish our current house. Bank turned us down flat. No negotiation. No lower number. Nothing.

We would like to move out of our neighborhood and buy a "for now house". Goal to live in it for 2-3 years...and then move...rent/sell that house.  Long term plan to accumulate assets/income-producing property.  

We both have crap credit scores (600ish).  He now has a great job.  VERY good salary for our area...except the job is out of state.  I have found a house in our size/price range (locally...we are not going out of state).  Needs updating...not the issue right now.

Would you buy House #2 with conventional mortgage?  How would you fund repairs on original house (rental)?  We have this huge hunk of equity sitting here...and can't find a dime.  

We need #1 mortgage for new house/eventual rental/flip.  And money for fixing house to rent.  Help please.

Thank you!

avery