If you are getting a loan no there is no way to protect yourself from crushing your credit or having a foreclosure against you if you are the borrower. 

We have secured a home equity loan against our home (which we own out right with no mortgage payment).

The counterclaim states that since the deed in lieu language was part of the loan, the entire loan is invalid.

Still, you may not have to submit your tax returns. more info would be needed to know for sure, reach out to a seasoned loan officer for pre-approval and see if your situation would allow for this. 

I think I'll have to wait 2-3 years to pay for the renovation unless I take out a loan for the shower renovation.

There you will be asked your criteria and then after answering a few questions you will be matched with 3-5 agents or loan officers in your area.

For comparison, a Navy Federal FCU personal loan will be in the 15s%

.~ I will most likely purchase the first home (multi-family) using a bridge-DSCR loan combo or a FHA203K (3.5-20% down). 

The SST doesn't apply for legal 2-flats so if you want to use FHA it's probably better to target those that maybe also have a non-conforming basement or attic unit.This is why the 5% down conventional loan is a game changer for house hackers.

What’s the purpose of the loan and what is the collateral?