I would also use the DSCR as the reasoning...the bank won't finance the deal if there is not a 1.25% variance and based on current income we are too far off.  

This creates an issues as no bank will give me a loan to purchase the property in its current state.

In short, goals:1) pay off $25k credit cards balance2) get some reserves around $10-15k(for materials) to finish renovation primary3) if anything left, maybe get some cash for down payment for another rental property So I am trying to choose between Cash Out refi vs HELOCI found two local banks that offer HELOCS on investment property. 70%LTV prime+2%(2.25%), got to pay $500-1500 closing fees.Same banks offer cash out refi for rental properties: 75%LTV, 5.5-6% 30 year fixed, 3000-4500 closing feesSeems like, if I go refi I can pull out around $83k ($105k(new loan) - $18k(current mortgage) - $4k(closing fee)=$83k $83k - $25k(credit cards) - $15k(to finish rehab) = $43k (for next investment).I am still researching and shopping around for other options, but refi seems to be a better option for right now. 

You would look for a construction bridge loan.Consider approaching a community banks that knows the market.

Have the seller provide bank statements showing monthly deposits matching the amount he said each tenant has been paying.

@Joseph Shaggs i would let the bank know ahead of time.

For people that are just starting out, there’s nothing better for finding income and expenses than having separate bank accounts for business and personal.

Since I plan to use the FHA program, is it better to just go to a bank directly than to use a mortgage broker?

Title report via escrow on this property showed a junior lien taken out at the same time as the senior lien from the same bank (Country wide).

I'm a little bit different, I don't use banks, I don't worry about ROI, I usually get built in equity when I buy, I always get $500 or more per door monthly cash flow, and I don't have to worry about Cap Ex or deferred maintenance.