How to access HELOC or hard money with high DTI

Question

Hi all, I have a property that I have already purchased and I am looking for a way to access additional funding to finish the rehab. I have significant equity in other properties and great credit score but am having trouble with a heloc due to a high DTI from the building that is currently being rehabbed being vacant. I have also struggled to figure out if a hard money loan will work given that the property has already been purchased. Any ideas on how I could access capital either through the equity in my other properties or another method?

thanks!

Kerry Baird · Answer

@Henry Lazerow you tickled my brain with your Lightstream comment.  I'd forgotten about that type of loan.  And @Jesse Rivera, I did not know there was a low-doc or  bank statement HELOC.  That is interesting!  Thanks for posting that nugget.

Ryan Blake · Answer

@Kerry Baird is 100% right. Hard money loans on existing deals are difficult to get. Hard money is lending based on the hard asset and it doesn't speak well when the project is mid-process and now more money is needed to be able to finish it. Many lenders will not want to step in when the project is partially done. HELOCS will definitely want to look at your DTI and credit.

I think @Denise Supplee is on the right track with a business line of credit. But @Tyler Dunkel, know that these are most of the time credit cards, not a typical bank loan or SBA loan. You will need to get the work done quick and sold or refinanced ASAP.

Wishing you the best of luck with this one.

Kerry Baird · Answer

Your situation is so difficult, and the best plan is to get financing before we need it.

It is so much easier to get a HELOC or second mortgage on a primary residence, and much more difficult and expensive to get one on a rental house. Conventional lending requires tax returns, good FICO and reasonable DTI.

DSCR mortgages are a business purpose lending that does not look at DTI.  You might also consider private money loans, local lenders and so forth.

Kerry Baird · Answer

@Jesse Rivera, I have also never heard of that product.  Going off to research now.  :D

Jesse Rivera · Answer

You can even use asset depletion for HELOCs. Another nugget for you!

Chris Seveney · Answer

have you considered bringing in an equity partner to provide a loan? you would have to give up some equity in the deal but something is always better than nothing. That is what we are seeing a lot more of recently and this is like my 4th post in the past week about it.

Henry Lazerow · Answer

I needed some extra financing on my first rehab and opened several 0 apr credit cards which I used for materials and payed them off before any interest. It's not huge but can easily get you 20-30k financed at 0 APR.

There also is Lightstream unsecred loans. Say home improvement and they will send you up to $50k at relatively low rates with no pre-payment penalties and they do not check how you spend the funds. Need good credit.

Hard money rates/terms so awful I don't see it as a viable option unless have some insane deal. Most my clients do conventional and some creative options for a bit extra financing if needed, saves a lot on fees/financing costs this way.

Jeff S. · Answer

Wow!!! Be super careful, @Tyler Dunkel. Fund and Grow appears to offer nothing more than one of those credit card stacking schemes that were popular here years ago.  Banks caught on to this nonsense at some point, but it seems there are new angles. Now, these outfits hire lots of influencers and affiliates, with no expertise, no financial background, and apparently limited ethics, to put it kindly.  Do some research on this practice and on this firm before diving in.  A few eye-opening online searches will easily indicate if this is what you want to get into.  Shame on those here recommending it.

Similarly, don’t even consider borrowing against your personal residence—even if you could qualify.  This puts your family’s home at risk and is unfair and irresponsible, in my view.

The claim that “hard money loans for existing deals are difficult to get” is simply not true. Many private and hard money lenders will refinance your investment property if the numbers make sense. This is where I would start if I were you—perhaps leveraging one of your existing properties.

As a last resort, you could look for a partner willing to fund the project in exchange for a share of the equity.  This would be the safest money but probably the costliest.

Don't build a house of cards, Tyler. And, don't get scammed.  Best of luck to you.

Jesse Rivera · Answer

Have you tried doin a bank statement HELOC instead of full doc? May give you enough income to lower your DTI.

Denise Supplee · Answer

You can try a business credit line. There is a company called Fund & Grow and they help you navigate this process and get between $50,000-$250,000 in combined business credit lines. They charge a (hefty) up-front fee, but they guarantee three rounds of financing over 12 months. And they get results.It works like this: for a one-time fee, they connect you with the best business credit cards available currently. They aim for 0% interest on all cards, for the first 9-12 months. They negotiate with the credit card companies on your behalf, helping you get the largest possible credit line. There is more info on my website.

How to access HELOC or hard money with high DTI

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