Hi Bigger Pockets Family,
I am in a very difficult situation with my first rental property and at this point, I'm not sure what to do. I know, I wrote too long of an explanation, and I apologize for that. I thought maybe explaining my situation thoroughly can make it easier for someone who understands to guide me in the right direction. But, PLEASE READ THROUGH THIS and for you experts out there, please provide some insight on what I can do in this situation. Well, here I go...
Back in January of this year, I purchased a small half-double rental property in the town that I live in. The funds I used to purchase this home was with a HML (hard money loan). They were able to fund the purchase price and part of the renovations. Essentially I borrowed 80% of the purchase price($28,480) of the home and part of the renovation($13,500) of the home, which was a total of $41,980. I also borrowed about $14,500, from a credit card that I have to cover part of the closing costs and down payment.
As you can see, I was almost completely leveraged in this deal, which was a big mistake. With this HML, I am in a 12 month balloon and am paying 12% interest, so its very expensive and currently the loan is due in less than 3 months, so I desperately need to find a lender who can help me get out of this loan.
Well going back to the story, right after I purchased the property, while I was in the middle of renovating, I decided to begin calling some banks to see what are my options to refinance. Most of them told me that I would need to have some cash flow from the property coming in and would need to have made 6 payments on the current loan before a decide to refinance. So, I decided to pause this search and just focus on finishing renovations and finding a tenant. Well, about 5 months later I finished renovations and found a tenant and began collecting rent.
At this point, I decided to start calling the banks again. After calling about 20 banks I decided that maybe I am not BANKABLE. My next mistake with this property is that I did not know that banks wont loan out to individuals without a W2 job and if you are self-employed or an independent contractor, then you need 2 years of tax returns showing that your income is suffice for them to lend to you. Well, at this time it was around the summer of 2020 and I had been ride-share driving and delivery driving for a little over a year, so this income was not able to be used to be approved for a loan, considering I have only been doing this for only 1 year. If I would have known this, I would have found a job after purchasing the property, but I just continued being self-employed.
I tried calling credit Unions, small local banks, big banks and commercial banks. I even tried calling people who can become a private lender and they weren't willing to help either. I asked the banks about cash-out refinancing, home equity line of credit, commercial loans, portfolio loans, no-doc loans, any loan you can think of and they all said I don't quality due to my income. That was such a bummer for me, considering I had excellent credit and most people say you must have good credit to acquire a loan from a bank. Well, that's obviously not the full truth. And on top of that, some banks also said I don't qualify, because the value of the home is too low($75k) and they don't loan out below the amount they have set.
I later was able to find a job, so I started working to increase my odds of getting a loan, but even then the issues with banks didn't stop. They say that my income is too low for this job and any other money I make, I cannot use, because I don't have 2 years of complete tax returns to use it. At this point I'm trying to find a good mortgage broker to see if they can find me a loan, but I'm desperate and don't know what to do. I feel like they might not be able to find me a loan either.
My last option is to try and sell it, but I'm not sure how lucky I would be doing that during holiday season and before January which is when my term expires. May someone PLEASE give me some advice in the situation and tell me what I can do to find a loan that will help me get out of this HML.
